As filed with the Securities and Exchange Commission on April 19, 1999
Registration No. 333-72833
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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STARBASE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 33-0567363
(State or other jurisdiction (IRS employer
of incorporation or organization) Identification number)
4 Hutton Centre Drive, Suite 800
Santa Ana, CA 92707-8713
(714) 445-4400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Douglas S. Norman
4 Hutton Centre Drive, Suite 800
Santa Ana, CA 92707-8713
(714) 445-4400
(Name, address, including zip code, telephone number, including area code, of
agent for service)
COPY TO:
Martin Eric Weisberg, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, NY 10036-8735
(212) 704-6050
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
[ ] -------------
If this Form is a post-effective amendment filed pursuant to Rule 462(b) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------
Proposed
Amount Maximum Proposed
To Be Aggregate Maximum Amount of
Title of each class of Registered Price Per Aggregate Registration
Securities to be registered (1) Share Offering Price Fee (6)
- ------------------------------ ---------------- ------------- --------------------- ----------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share 155,993 $ 2.079 (4) $ 324,231.45 $ 90.14
Common Stock, par value
$0.01 per share 6,588,842 (2) $ 2.079 (4) $ 13,694,908.10 $ 3,807.18
Common Stock, par value
$0.01 per share 435,977 (3) $ 2.274 (5) $ 964,753.19 $ 268.20
- -----------------------------------------------------------------------------------------------------------------------------
Total 7,180,812 $ 14,983,892.74 $ 4,165.52
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</TABLE>
(1) Represents the shares of common stock being registered for resale by the
selling stockholders.
(2) The shares of common stock offered hereby is our good faith estimate of the
number of shares of common stock to be issued by us upon the conversion of
the series H preferred stock issued in connection with a private placement
with the selling stockholders. Our estimate represents 200% of the number
of shares that would be issuable upon conversion of the preferred stock
based on the price of the common stock on April 14, 1999. Such number is
subject to adjustment and could be materially greater or less than the
amount of shares being registered hereby depending upon the future price of
the common stock. Pursuant to Rule 416, the shares of common stock covered
hereby include such indeterminate number of shares that may be issued as a
result of anti-dilution provisions included in the securities purchase
agreement, including, among others, stock splits, stock dividends and
similar transactions. This presentation is not intended to constitute a
prediction of the future market price of the common stock or the number of
shares of common stock issuable upon conversion of the series H preferred
stock.
(3) Represents shares issuable upon exercise of warrants evidencing the right
to purchase shares of common stock. Pursuant to Rule 416, the shares of
common stock offered hereby also include such presently indeterminate
number of shares of common stock that may be issued as a result of
anti-dilution provisions included in the warrant agreements, including,
among others, stock splits, stock dividends and similar transactions.
(4) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and (g) of the Securities Act of 1933, as amended,
based on the average ($2.079) of the bid ($2.063) and asked ($2.094) price
of the common stock on the Nasdaq SmallCap Market on April 14, 1999.
(5) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and (g) of the Securities Act. The prices per share
and aggregate offering prices are based on (i) with respect to 385,977
shares of common stock issuable upon exercise of warrants, the average
($2.079) of the bid ($2.063) and asked ($2.094) price of the common stock
on the Nasdaq SmallCap Market on April 14, 1999 and (ii) with respect to
50,000 shares of common stock issuable upon exercise of warrants, the
exercise price of the warrants.
(6) An amount of $3,438.94 was previously paid in connection with the original
filing of the registration statement on February 23, 1999.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
An Exhibit Index appears on page E-1
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not seeking an offer to buy these securities in
any state where the offer or sale is not permitted.
PROSPECTUS
StarBase Corporation
7,180,812 shares of Common Stock
o The shares of common stock offered by this prospectus are
being sold by the selling stockholders. The selling
stockholders may offer their shares through public or private
transactions, at prevailing market prices, or at privately
negotiated prices.
o We will not receive any proceeds from the exercise of these
shares. We will receive proceeds from the exercise of warrants
and those proceeds will be used for our general corporate
purposes.
o Our common stock is traded on the Nasdaq SmallCap Market under
the symbol "SBAS."
o On April 14, 1999, the closing bid price of our common stock
on the Nasdaq SmallCap Market was $2.063.
The securities offered in this prospectus involve a high degree of
risk. You should carefully consider the factors described under the
heading "Risk Factors" beginning on page 3 of this prospectus.
--------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined
if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
--------------------------------------------------
____________ , 1999
<PAGE>
Table of Contents
Risk Factors................................................................3
Forward-Looking Statements..................................................7
Use of Proceeds.............................................................7
Selling Stockholders........................................................7
Description of Securities..................................................10
Plan of Distribution.......................................................12
Where You Can Find More Information........................................13
Indemnification of Directors and Officers..................................14
Legal Matters..............................................................14
Experts....................................................................14
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<PAGE>
Risk Factors
This offering involves a high degree of risk, including those risks
described below. You should carefully consider these risk factors, together with
all of the other information in this prospectus, before deciding to invest in
shares of our common stock.
Risks associated with our past financial results
We could be required to cut back or stop operations if we are unable to raise or
obtain needed funding
Our ability to continue operations will depend on our positive cash
flow, if any, from future operations or our ability to raise additional funds
through equity or debt financing. We do not know if we can raise additional
funding or that such funding will be available on favorable terms. We could be
required to cut back or stop operations if we are unable to raise or obtain
needed funding.
Our cash requirements to run our business have been and will continue
to be significant. Since 1995, our negative cash flow from operations is as
follows:
Fiscal year ended: Negative Cash
Flow
- ----------------- -------------
o March 31, 1995 $6,179,000
o March 31, 1996 $4,949,000
o March 31, 1997 $6,506,000
o March 31, 1998 $5,662,000
- ---------------------------------------------------------
Nine Months ended: Negative Cash
Flow
- ----------------- -------------
o December 31, 1998 $8,021,000
We have a history of losses and if we do not achieve profitability we may not be
able to continue our business in the future
As of December 31, 1998 we accumulated losses of approximately
$49,000,000. We anticipate incurring additional losses until we can successfully
market and distribute our products and develop new technologies and commercially
viable products. If we are unable to do so, we will continue to have losses and
might not be able to continue our operations.
The "going concern" qualification on the report of our independent accountants
may hurt our ability to raise additional financing
The report of our independent accountants on our March 31, 1998
consolidated financial statements contains an explanatory paragraph regarding
our ability to continue as an ongoing business. Our independent accountants cite
recurring losses that raise substantial doubt as to our ability to continue as
an ongoing business. This "going concern" qualification may reduce our ability
to obtain necessary financing in the future to run our business.
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<PAGE>
Risks associated with our business
Our software products may not be successfully completed or accepted by the
public which could result in lower revenues
While we are in various stages of developing additional products, we
cannot assure you that such additional products will be completed in a timely
manner or successfully marketed. In the past we have experienced some product
release delays which resulted in lower revenues. Further, the market for our
team collaboration and software configuration management tools is evolving. This
causes the sales cycle to be longer due to the time it takes to educate
potential customers on the benefits of our products. We cannot assure you that
the products we introduce will achieve acceptance, or that other software
vendors will not develop and market products which render our products obsolete
or less competitive. Failure to obtain significant customer satisfaction or
market share for our products would significantly and negatively affect our
revenues.
We may have to lower prices or spend more money to effectively compete against
companies with greater resources than us which could result in lower revenues
and/or profits
The success of our products in the marketplace depends on many factors,
including product performance, price, ease of use, support of industry
standards, and customer support and service. Given these factors we cannot
assure you that we will be able to compete successfully. For example, if our
competitors offer lower prices, we could be forced to lower prices which would
result in reduced margins and a decrease in revenues. If we do not lower prices
we could lose sales and market share. In either case, if we are unable to
compete against companies who can afford to cut prices, we would not be able to
generate sufficient revenues to grow the company or reverse our history of
losses.
In addition, we may have to spend more money to effectively compete for
market share, including funds to expand our infrastructure, which is a capital
and time extensive process. Further, if other companies want to aggressively
compete against us, we may have to spend more money on advertising, promotion,
trade shows, product development, marketing and overhead expenses, hiring and
retaining personnel, and developing new technologies. These higher expenses
would hurt our net income and profits.
Our computer systems may not recognize the year 2000 which may disrupt our
business
The concerns about the upcoming year 2000 have arisen because older
computer programs that used two digits rather than four to define the applicable
year could malfunction. As a result, any computer programs that have
date-sensitive software may recognize a date using 00 as the calendar year 1900
rather than the year 2000. This could result in a computer system failure or in
miscalculations causing disruptions of operations, including a temporary
inability to process transactions, or engage in normal business activities.
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<PAGE>
Risks associated with our securities
Your percentage of ownership, voting power and price of StarBase common stock
may decrease as a result of events which increase our outstanding common stock
As of April 14, 1999, we had the following capital structure:
Common stock outstanding: 28,671,362
Common stock issuable upon:
Conversion of series E preferred stock: 584,808
Conversion of series H preferred stock: 3,294,421
Conversion of series I preferred stock: 756,372
Exercise of warrants: 2,949,388
Exercise of options: 6,557,411
Total: 42,813,762
The number of shares of our common stock outstanding includes 1,418,638
shares held in escrow under a performance escrow agreement. Each share of series
E preferred stock converts into one share of common stock. The series H
preferred stock and series I preferred stock are estimates based on the number
of shares that would be issuable upon conversion of the preferred stock as of
April 14, 1999. The common stock issuable upon exercise of options must vest and
is generally issuable over a four year period. As of April 14, 1999, only
2,124,693 shares could be issued upon the exercise of options. We may conduct
additional future offerings of our common stock or other securities with rights
to convert the securities into shares of our common stock.
The following table sets forth the number of shares of common stock
that would be issued assuming full conversion of our outstanding preferred stock
based upon the market price of the common stock as of April 14, 1999 ($2.06)
and, assuming a market price of the common stock at $1.00 per share and at $3.00
per share. The table also sets forth the percentage of the common stock
outstanding at these market prices.
Price of Common Stock: $1.00 $2.09 $3.00
Series E Preferred Stock: 584,808 584,808 584,808
Series H Preferred Stock: 3,633,479 3,294,421 3,121,738
Series I Preferred Stock: 1,111,111 756,372 666,667
Percentage of Outstanding
Common Stock: 19% 16% 15%
Conversion or exercise of our outstanding convertible securities,
options and warrants into common stock would result in a significant number of
additional shares of common stock in the market. This may significantly and
negatively affect the prevailing market price for the common stock and will
decrease your percentage of ownership and voting power.
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<PAGE>
The conversion of outstanding preferred stock may have a significant negative
effect on the price of the common stock and cause the selling stockholders to
receive a greater number of shares upon subsequent conversions of the preferred
stock
The series H preferred stock and series I preferred stock are
convertible at a floating rate that may be below the market price of the common
stock. As a result, the lower the stock price at the time the holder converts,
the more common stock the holder will get upon conversion. To the extent the
selling stockholders convert and then sell their common stock, the common stock
price may decrease due to the additional shares in the market. This could allow
the selling stockholders to convert their convertible preferred stock into
greater amounts of common stock, the sales of which could further depress the
stock price. The significant downward pressure on the price of the common stock
as the selling stockholders convert and sell material amounts of common stock
could encourage short sales by the selling stockholders and others in which the
short-sellers borrow common stock at the current market price in hope to buy it
in the future at a lower price. This could place further downward pressure on
the price of the common stock.
In addition, the conversion of the convertible preferred stock may
result in substantial dilution to the interests of other holders of common stock
since each holder of convertible preferred stock may ultimately convert and sell
the full amount issuable on conversion. Although each selling stockholder may
not convert their preferred stock if, as a result, they would own more than
4.99% of the then outstanding common stock, this restriction does not prevent a
selling stockholder from converting and selling some of its holdings and then
converting the rest of its holdings. In this way, an individual selling
stockholder could sell more than 4.99% of the outstanding common stock while
never holding more than 4.99% at one time.
Your interest in StarBase may be diluted by the issuance of preferred stock with
greater rights than the common stock which we can sell or issue at any time
The sale or issuance of any shares of preferred stock having rights
superior to those of the common stock may result in a decrease in the value or
market price of the common stock. The issuance of preferred stock could have the
effect of delaying, deferring or preventing a change of ownership without
further vote or action by the stockholders and may adversely affect the voting
and other rights of the holders of common stock.
Our board of directors is authorized to issue up to 10,000,000 shares
of preferred stock. The board has the power to establish the dividend rates,
preferential payments on our liquidation, voting rights, redemption and
conversion terms and privileges for any series of preferred stock.
If we cannot meet the Nasdaq SmallCap Market maintenance requirements and Nasdaq
rules, Nasdaq may delist the common stock which could negatively affect the
price of the common stock and your ability to sell the common stock
In the future, we may not be able to meet the listing maintenance
requirements of the Nasdaq SmallCap Market and Nasdaq rules, which require,
among other things, minimum net tangible assets of $2 million, a minimum bid
price for our common stock of $1.00, and shareholder approval prior to the
issuance of securities in connection with a transaction involving the sale or
issuance of common stock equal to 20 percent or more of a company's outstanding
common stock before the issuance for less than the greater of book or market
value of the stock. Although we currently comply with Nasdaq's listing
maintenance requirements, in the past there have been times when we have not
been in compliance and it is possible we may not meet the requirements in the
future. For example, the dilution resulting from the issuance of the convertible
preferred stock discussed above and the subsequent conversion and sale of common
stock could have a substantial depressive effect on the common stock bid price,
causing it to decrease below $1.00. If we were no longer in compliance with
Nasdaq rules and were unable to receive a waiver of the rules or achieve
compliance, and if our common stock were to be delisted from the SmallCap
market, an investor in our
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<PAGE>
company may find it more difficult to sell our common stock. This lack of
liquidity also may make it more difficult for us to raise capital in the future.
Forward - Looking Statements
In this prospectus, we make statements about our future financial
condition, results of operations and business. These are based on estimates and
assumptions made from information currently available to us. Although we believe
these estimates and assumptions are reasonable, they are uncertain. These
forward- looking statements can generally be identified because the context of
the statement includes words such as may, will, except, anticipate, intend,
estimate, continue, believe or other similar words. Similarly, statements that
describe our future expectations, objectives and goals or contain projections of
our future results of operations or financial condition are also forward-looking
statements. Our future results, performance or achievements could differ
materially from those expressed or implied in these forward-looking statements,
including those listed under the heading "Risk Factors" and other cautionary
statements in this prospectus.
Use of Proceeds
The selling stockholders are selling all of the shares covered by this
prospectus for their own accounts. Accordingly, we will not receive any proceeds
from the resale of the shares. We will receive proceeds from the exercise of the
warrants. If all the warrants were exercised, we would receive approximately
$617,000. We will use the net proceeds for general corporate purposes. We will
bear all expenses relating to this registration except for brokerage or
underwriting commissions and expenses, if any, which the selling stockholders
will pay.
Selling Stockholders
This prospectus covers the resale by the selling stockholders of up to
6,588,842 shares of our common stock to be issued upon the conversion of the
series H preferred stock, which amount of shares is an estimate and is not a
prediction of the actual number of shares of common stock we will issue upon
conversion of the series H preferred stock. This prospectus also covers the
resale by the selling stockholders of up to 435,977 shares of our common stock
issuable upon exercise of warrants issued in connection with a private
placement, consulting agreements and an accounts receivable purchase agreement.
This prospectus also covers the resale by the selling stockholders of 155,993
shares of our common stock issued for consulting services.
Series H preferred stock
The holders of the series H preferred stock and warrants issued in
connection with the private placement have the material rights and obligations
discussed below and under the section entitled "Description of Securities". The
agreements relating to these rights and obligations have been previously filed
by us with the SEC and you are urged to read them in their entirety.
Securities purchase agreement
The investors listed in the table below agreed to buy 3,000 shares of
our series H preferred stock in increments of 1,000 shares on November 24, 1998,
December 30, 1998 and February 8, 1999. The price for each share was $1,000 for
an aggregate purchase price of $3,000,000.
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<PAGE>
Registration rights agreement
In connection with our sale of series H preferred stock, we agreed to
file a registration statement covering the resale of the common stock issuable
upon conversion of the series H preferred stock and exercise of the warrants by
February 23, 1999 and cause the registration statement to be declared effective
by the SEC by April 23, 1999. If the registration statement is not effective by
April 23, 1999, we will have to pay to the holders liquidated damages equal to
2% of the value of outstanding series H preferred stock for each 30 day period
until the registration statement has been declared effective.
Warrants
The holders of series H preferred stock also received 323,025 warrants
to purchase 323,025 shares of common stock. One-third of the warrants are
exercisable at $0.95 and expire on November 24, 2003, one-third are exercisable
at $0.73 and expire on December 31, 2003 and the final one-third are exercisable
at $1.93 and expire on February 8, 2004. All of the warrants have adjustment
provisions for standard dilution events including stock splits, stock dividends
and similar transactions.
Accounts Receivable Purchase Agreement
This prospectus also covers the resale by Silicon Valley Bank of 55,452
shares of common stock issuable upon exercise of warrants issued to Silicon
Valley Bank for establishing an accounts receivable facility with us. These
warrants are immediately exercisable at $1.08 and expire on January 19, 2004.
Consulting Agreements
This prospectus also covers the resale by the selling stockholders of
common stock and warrants issued for consulting services. Included are 75,993
shares of common stock and 50,000 shares of common stock issuable upon exercise
of warrants issued for consulting fees to Continental Capital & Equity
Corporation, a financial public relations firm. The warrants are exercisable at
$3.25 and expire on February 17, 2000. In addition, 80,000 shares of common
stock were issued to Mr. Kurt Motamedi who provided management and team
development consulting services.
We are registering the shares of common stock offered in this
prospectus with the SEC to permit public secondary trading. As a result, the
selling stockholders may offer all or part of the shares for resale to the
public from time to time.
The table below lists information regarding the selling stockholders'
ownership of shares of our common stock, assuming the conversion of preferred
stock at the then conversion ratio as of April 14, 1999, and as adjusted to
reflect the sale of the shares and the exercise of warrants on April 14, 1999.
Information concerning the selling stockholders may change from time to time. To
the extent that the selling stockholders or any of its representatives advise us
of such changes and if required, we will report those changes in a supplement to
this document. Except as set forth in this prospectus, to our knowledge, no
selling stockholder has held any position or office, or has had any material
relationship, with us or any parties related to us within the past three years.
The number of shares of common stock indicated in the Amount
Beneficially Owned Prior to Offering column is an estimate and includes 200% of
the number of shares that would be issuable upon conversion of 3,185 shares of
the preferred stock based on the price of the common stock on April 14, 1999
plus the shares issuable upon exercise of warrants evidencing the right to
purchase shares of common stock and is subject to adjustment. The actual amount
could be materially more or less than such estimated amount depending upon
factors that we cannot predict at this time.
The Amount Offered column assumes no sales are effected by the selling
stockholders during the offering period other than under the registration
statement.
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<TABLE>
<CAPTION>
Amount Percentage
Amount Percentage Beneficially Beneficially
Beneficially Beneficially Owned Owned
Owned Prior Owned Prior Amount Following Following
Name to Offering to Offering Offered Offering Offering
- ------------------------------------ -------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balmore Fund S.A. (1) 1,686,616 4.6 1,626,616 60,000 *
Austost Anstalt Schann. (2) 1,686,616 4.6 1,626,616 60,000 *
HSBC James Capel Canada, 650,646 1.8 650,646 0 0
Inc. (3)
Manchester Asset Management. (4) 1,146,723 3.1 1,070,994 75,729 *
Amro International (5) 665,846 1.8 650,646 15,200 *
Gundyco in Trust for 1,759,847 4.8 1,138,632 621,215 1.7
RRSP 550-98866-19 (6)
Libra Finance S.A. (7) 69,517 * 65,064 4,453 *
Black Hills Investment Corp. (8) 78,153 * 78,153 0 0
Kurt Motamedi (9) 80,000 * 80,000 0 0
Continental Capital &
Equity Corp. (10) 125,993 * 125,993 0 0
Institutional Development, 12,000 * 12,000 0 0
Inc. (11)
Silicon Valley Bank (12) 66,952 * 55,452 11,500 *
- ------------------------------
* Represents less than one percent.
</TABLE>
(1) The number of shares issuable pursuant to conversion of series H
preferred stock is 1,551,616. Includes 135,000 shares of common stock
issuable upon the exercise of warrants owned prior to offering of which
75,000 are offered in this prospectus. The natural person who exercises
control over these shares is Mr. Francois Morax.
(2) The number of shares issuable pursuant to conversion of series H
preferred stock is 1,551,616. Includes 135,000 shares of common stock
issuable upon the exercise of warrants owned prior to offering of which
75,000 are offered in this prospectus. The natural person who exercises
control over these shares is Mr. Thomas Hackl.
(3) The number of shares issuable pursuant to conversion of series H
preferred stock is 620,646. Includes 30,000 shares of common stock
issuable upon the exercise of warrants. A committee and not a natural
person exercises control over these shares.
(4) Includes 245,836 shares issuable upon conversion of series H preferred
stock and 11,850 shares issuable upon the exercise of warrants for
placement agent fees. The number of shares issuable pursuant to
conversion of series H preferred stock is 1,021,644. Includes 125,079
shares of common stock issuable upon the exercise of warrants owned
prior to offering of which 49,350 are offered in this prospectus. The
natural person who exercises control over these shares is Mr. Anthony
L.M. Inder Rieden.
(5) The number of shares issuable pursuant to conversion of series H
preferred stock is 620,646. Includes 45,200 shares of common stock
issuable upon the exercise of warrants owned prior to offering of which
30,000 are offered in this prospectus. The natural person who exercises
control over these shares is Mr. H.V. Bachofen.
(6) The number of shares issuable pursuant to conversion of series H
preferred stock is 1,086,132. Includes 673,715 shares of common stock
issuable upon the exercise of warrants owned prior to
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<PAGE>
offering of which 52,500 are offered in this prospectus. The natural
person who exercises control over these shares is Mr. Mark Shoom.
(7) Includes 62,064 shares issuable upon conversion of series H preferred
stock and 3,000 shares issuable upon the exercise of warrants for
placement agent fees. The number of shares issuable pursuant to
conversion of series H preferred stock is 62,064. Includes 7,453 shares
of common stock issuable upon the exercise of warrants owned prior to
offering of which 3,000 are offered in this prospectus. The natural
person who exercises control over these shares is Mr. Seymour Braun.
(8) The number of shares issuable for placement agent fees pursuant to
conversion of series H preferred stock is 74,478. Includes 3,675 shares
of common stock issuable for placement agent fees upon the exercise of
warrants. The natural person who exercises control over these shares is
Mr. Lawrence Gibson.
(9) Represents shares of common stock.
(10) Includes 50,000 shares of common stock issuable upon the exercise of
warrants. The natural person who exercises control over these shares is
Ms. Dodi Zirkle.
(11) Represents common stock issuable upon the exercise of warrants for
placement agent fees. The natural person who exercises control over
these shares is Mr. Barry Lederman.
(12) Includes 55,452 shares of common stock issuable upon the exercise of
warrants. The natural person who exercises control over these shares is
Mr. David Jaques.
Description of Securities
Series H preferred stock
In November 1998, we entered into security purchase agreements to sell
3,000 shares of series H preferred stock and 185 shares of series H preferred
stock were issued as placement agent's fees. Each share of preferred stock has a
stated value, or "liquidation preference", of up to $1,000, which means that, in
the event of a liquidation, dissolution or winding up of our company, for
example, if we go bankrupt and all of our assets are sold, the holders of each
share would be entitled to a preferential payment of up to $1,000 before holders
of our common stock would receive any of the proceeds from the sale. A
certificate of designation filed with the secretary of state of Delaware governs
the terms and conditions of the preferred stock. The following is a brief
description of key terms of the preferred stock.
Dividends
The holders of the preferred stock are not entitled to receive any
dividends.
Conversion rights
The holders of preferred stock shall have the right to convert their
shares into common stock as follows:
(1) prior to March 23, 1999, a holder may not convert
preferred stock;
(2) beginning March 24, 1999, holders may convert
one-third of the preferred stock;
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(3) beginning April 23, 1999, holders may convert an
additional one-third of the preferred stock; and
(4) beginning May 23, 1999, holders may convert the final
one-third of the preferred stock.
The number of shares of common stock into which each share of the
preferred stock may be converted shall be determined by dividing the liquidation
preference, or $1,000, by an amount equal to the lesser of: (a) the "fixed
conversion price", which was 110% of the average of the closing bid prices of
the common stock for the five-day trading period on the trading date immediately
preceding the date of issuance of the preferred stock or (b) the "market price",
which means the average of the two lowest closing bid prices of the common stock
over the thirty trading days immediately preceding the date of conversion. The
preferred stock was issued in three equal installments, therefore, there are
three different fixed conversion prices: $0.95, $0.73 and $1.93. For example, if
on April 14, 1999 an investor who purchased shares of preferred stock in the
first tranche converted one share of preferred stock, it would receive 1,052
shares of common stock, calculated by dividing $1,000 by $.95, since $.95 is
less than the market price. The conversion price shall be adjusted for
subdivisions or combinations of common stock, dividends or distributions,
issuances of common stock or common stock equivalents, mergers or any
reclassification of the common stock. We shall not be obligated to issue any
shares of common stock upon conversion of the preferred stock if such issuance
would exceed the number of shares allowed by Nasdaq unless we obtain stockholder
approval for such issuances or a written legal opinion. However, we will issue
such excess shares at the closing bid price of the common stock together with
additional warrants to purchase common stock exercisable at the market price of
the common stock, which amount of warrants shall be based on a ratio of 200,000
shares for each $1,000,000 principal amount of preferred stock which cannot be
converted under the Nasdaq rules.
The preferred stock is convertible up to two years from the date the
registration statement is declared effective by the SEC. In the event that any
shares of preferred stock remain outstanding on the second anniversary of the
effective date, all remaining shares of preferred stock must be converted on
that date. We may elect upon written notice to convert the preferred stock if
the closing bid price of our common stock averages at least $5.00 for 20
consecutive trading days if the registration statement is effective and all
other conversion restrictions have lapsed for at least 30 calendar days. If we
do not convert preferred shares into common shares within five days of receipt
of a notice of conversion, then the holders will be entitled to penalties in the
amount of 1/2% per day of the value of the preferred stock being converted for
the first 10 calendar days without conversion and 1% per day thereafter until
the conversion is completed.
We will reserve and keep available a sufficient number of authorized
shares of common stock to enable the conversion of all outstanding shares of the
preferred stock.
Optional redemption
We may redeem all or a portion of the preferred stock upon five
business days prior written notice to the holders at a price per share equal to
the greater of:
(1) $1,200 per share; or
(2) the difference between (a) the conversion price and
(b) the closing bid price of the common stock on the
trading date immediately preceding the date of the
notice of redemption.
Until converted, we will be entitled to redeem shares of the preferred stock in
accordance with the terms and conditions set forth in the certificate of
designation.
-11-
<PAGE>
No voting rights
Except as otherwise provided by law, preferred stockholders shall not
be entitled to vote upon any matter relating to our business affairs or for any
other purpose.
Plan of Distribution
The selling stockholders may offer their shares of common stock at
various times in one or more of the following transactions:
o On any U.S. securities exchange on which our common stock may be
listed at the time of such sale;
o In the over-the-counter market;
o In transactions other than on such exchanges or in the
over-the-counter market;
o In connection with short sales; or
o In a combination of any of the above transactions.
The selling stockholders may offer their shares of common stock at
prevailing market prices, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices.
The selling stockholders may use broker-dealers to sell their shares of
common stock. If this occurs, broker-dealers will either receive discounts or
commission from the selling stockholder, or they will receive commissions from
the purchasers of shares of common stock for whom they acted as agents. Such
brokers may act as dealers by purchasing any and all of the shares covered by
this prospectus either as agents for others or as principals for their own
accounts and reselling such securities under the prospectus.
The selling stockholders and any broker-dealers or other persons acting
on the behalf of parties that participate in the distribution of the shares may
be considered underwriters under the Securities Act. As such, any commissions or
profits they receive on the resale of the shares may be considered underwriting
discounts and commissions under the Securities Act.
As of the date of this prospectus, we are not aware of any agreement,
arrangement or understanding between any broker or dealer and the selling
stockholders with respect to the offer to sale of the shares under this
prospectus. If we become aware of any agreement, arrangement or understanding,
to the extent required under the Securities Act, we will file a supplemental
prospectus to disclose:
(1) the name of any such broker-dealers;
(2) the number of shares involved;
(3) the price at which such shares are to be sold;
(4) the commissions paid or discounts or concessions
allowed to such broker-dealers, where applicable;
(5) that such broker-dealers did not conduct any
investigation to verify the information set out in
this prospectus, as supplemented; and
-12-
<PAGE>
(6) other facts material to the transaction.
The stock purchase agreements have reciprocal indemnification
provisions between us and each selling stockholder to indemnify each other
against liabilities under the Securities Act, which may be based upon, among
other things, any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission of a material fact. We have agreed to
bear customary expenses incident to the registration of the shares for the
benefit of the selling stockholders in accordance with such agreements, other
than underwriting discounts and commissions directly attributable to the sale of
such securities by or on behalf of the investor.
Where You Can Find More Information
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, DC, New York, NY, and Chicago,
IL. Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from the SEC's
website at http://www.sec.gov.
We have filed a registration statement on Form S-3 with the SEC to
register shares of our common stock. This prospectus is part of that
registration statement and, as permitted by the SEC's rules, does not contain
all of the information included in the registration statement. For further
information about us and this offering, you may refer to the registration
statement and its exhibits. You can review and copy the registration statement
and its exhibits at the public reference facilities maintained by the SEC or on
the SEC's website described above.
This prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is
considered to be a part of this prospectus, and information that we file with
the SEC at a later date will automatically update or supersede this information.
We incorporate by reference the following documents as well as any future filing
we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
1. Annual Report on Form 10-KSB/A for the fiscal year ended March 31,
1998;
2. Quarterly Reports on Form 10-QSB for the periods ended June 30,
1998, September 30, 1998 and December 31, 1998;
3. Current Reports on Form 8-K filed on August 17, 1998 and March 23,
1999; and
4. Registration Statement on Form 10, as amended, containing the
description of our common stock, dated April 27, 1995.
You may request a copy of these filings, at no cost, by writing to us
at 4 Hutton Centre Drive, Suite 800, Santa Ana, CA 92707-8713, Attention:
Investor Relations.
-13-
<PAGE>
Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law allows companies to
indemnify their directors and officers against expenses, judgments, fines and
amounts paid in settlement under the conditions and limitations described in the
law.
Our certificate of incorporation provides that a director is not
personally liable for monetary damages to us or our stockholders for breach of
his or her fiduciary duties as a director. A director will be held liable for a
breach of his or her duty of loyalty to us or our stockholders, his or her
intentional misconduct or willful violation of law, actions or in actions not in
good faith, an unlawful stock purchase or payment of a dividend under Delaware
law, or transactions from which the director derives an improper personal
benefit. This limitation of liability does not affect the availability of
equitable remedies against the director including injunctive relief or
rescission. Our certificate of incorporation authorizes us to indemnify our
officers, directors and other agent to the fullest extent permitted under
Delaware law.
We have entered into an indemnification agreement with each of our
directors and officers. In some cases, the provisions of the indemnification
agreement may be broader than the specific indemnification provisions contained
in our certificate of incorporation or otherwise permitted under Delaware law.
Each indemnification agreement may require us to indemnify an officer or
director against liabilities that may arise by reason of his status or service
as an officer or director, or against liabilities arising from the director's
willful misconduct of a culpable nature. The indemnification agreement may also
require us to obtain directors' and officers' liability insurance, if available
on reasonable terms. We maintain a directors and officers liability policy with
Lloyds of London and General Star Indemnity Corporation that contains an
aggregate limit of liability of $5,000,000 through 2001.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to these provisions, or otherwise, we have been advised that, in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
Legal Matters
Parker Chapin Flattau & Klimpl, LLP, New York, New York will pass upon
the validity of the securities offered hereby. Martin Eric Weisberg, Esq., a
member of the firm, is our Secretary.
Experts
The financial statements for the year ended March 31, 1998 incorporated
by reference in this prospectus have been so incorporated in reliance on the
report (which contains an explanatory paragraph relating to the ability of
StarBase to continue as a going concern, as described in Note 2 to the financial
statements, and an explanatory paragraph relating to our restated loss per
common share calculation, as described in Note 3 to the financial statements) of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
-14-
<PAGE>
We have not authorized any dealer, salesperson or any other person to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information. This prospectus does not offer to sell
or buy any shares in any jurisdiction where it is unlawful. The information in
this prospectus is current as of _______________.
----------------
TABLE OF CONTENTS PAGE
- --------------------------------------------------------------------------------
Risk Factors 3
Forward-Looking Statements 7
Use of Proceeds 7
Selling Stockholders 7
Description of Securities 10
Plan of Distribution 12
Where You Can Find More Information 13
Indemnification of Directors and Officers 14
Legal Matters 14
Experts 14
- --------------------------------------------------------------------------------
7,180,812 SHARES OF COMMON STOCK
STARBASE CORPORATION
-------------
PROSPECTUS
-------------
_______________ , 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses which will be paid
by StarBase in connection with the issuance and distribution of the securities
being registered on this registration statement. The selling stockholders will
not incur any of the expenses set forth below. All amounts shown are estimates.
SEC Registration Fee $ 4,165.52
Legal Fees and Expenses 6,000.00
Accounting Fees and Expenses 10,000.00
Miscellaneous Expenses 1,000.00
-----------------------
Total $ 21,165.52
====================
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") provides, in general, that a corporation incorporated under the
laws of the State of Delaware, such as the registrant, may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (other than a derivative action
by or in the right of the corporation) by reason of the fact that such person is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another enterprise, against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation, and ,with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful. In the case of a derivative action, a Delaware corporation
may indemnify any such person against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or any other court in which such
action was brought determines such person is fairly and reasonable entitled to
indemnity for such expenses.
The Certificate of Incorporation of StarBase provides that directors
shall not be personally liable for monetary damages to StarBase or its
stockholders for breach of fiduciary duty as a director, except for liability
resulting from a breach of the director's duty of loyalty to StarBase or its
stockholders, intentional misconduct or willful violation of law, actions or in
actions not in good faith, an unlawful stock purchase or payment of a dividend
under Delaware law, or transactions from which the director derives improper
personal benefit. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission. The Certificate
of Incorporation of StarBase also authorizes StarBase to indemnify its officers,
directors and other agents, by bylaws, agreements or otherwise, to the fullest
extent permitted under Delaware law. StarBase has entered into an
Indemnification Agreement (the "Indemnification Agreement") with each of its
directors and officers which may, in some cases, be broader than the specific
indemnification provisions contained in the Certificate of Incorporation of
StarBase or as otherwise permitted under Delaware law. Each Indemnification
Agreement may require StarBase, among other things, to indemnify officers and
directors against liabilities that may arise by reason of their status or
service as a director or officer, against liabilities arising from willful
II-1
<PAGE>
misconduct of a culpable nature, and to obtain directors' and officers'
liability insurance if available on reasonable terms.
StarBase maintains a directors and officers liability policy with
Lloyds of London and General Star Indemnity Corporation that contains an
aggregate limit of liability of $5,000,000 through 2001.
ITEM 16. EXHIBITS.
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------------- ----------------------------------------------------------------
4.1 Form of Stock Purchase Agreement (Series H Preferred Stock).
Incorporated by reference to Exhibit 10.1 to the Company's
Report on Form 10-QSB for the period ended December 31, 1998.
4.2 Certificate of Designation (Series H Preferred Stock).
Incorporated by reference to Exhibit 10.2 to the Company's
Report on Form 10-QSB for the period ended December 31, 1998.
4.3 Form of Registration Rights Agreement (Series H Preferred
Stock). Incorporated by reference to Exhibit 10.3 to the
Company's Report on Form 10-QSB for the period ended December
31, 1998.
4.4 Form of Warrant (Series H Preferred Stock and other warrants).
Incorporated by reference to Exhibit 10.4 to the Company's
Report on Form 10-QSB for the period ended December 31, 1998.
4.5 Form of Warrant (Accounts Receivable Purchase Agreement with
Silicon Valley Bank). Incorporated by reference to Exhibit 4.5
to the original filing of this registration statement, file
number 333-72833.
4.6* Accounts Receivable Purchase Agreement with Silicon Valley Bank.
4.7* Intellectual Property Security Agreement with Silicon Valley
Bank.
4.8* Consulting Agreement with Kurt Motamedi.
4.9* Consulting Agreement with Continental Capital & Equity Corp.
5.1* Opinion of Parker Chapin Flattau & Klimpl, LLP.
23.1 Consent of Parker Chapin Flattau & Klimpl, LLP (included in
Exhibit 5.1).
23.2+ Consent of PricewaterhouseCoopers, LLP.
24.1 Powers of Attorney of certain directors and officers of
StarBase. Incorporated by reference to page II-5 of the original
filing of the registration statement, file number 333-72833.
- -----------------------
* Filed herewith.
+ To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in the volume
of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high
II-2
<PAGE>
and of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424 (b) if, in the
aggregate the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer, or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
of controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1923 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1923) that is incorporated by reference statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bonafide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to its Registration Statement on Form S-3 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Santa Ana, State of
California, on April 19, 1999.
STARBASE CORPORATION
By: /s/ Douglas S. Norman
-----------------------------
Douglas S. Norman
Director of Finance and
Chief Accounting Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* President, Chief Executive April 19, 1999
Officer
- ---------------------------------------
William R. Stow III and Chairman of the Board
* Vice Chairman April 19, 1999
- ---------------------------------------
Donald R. Farrow and Director
* Director April 19, 1999
- ---------------------------------------
Frank R. Caccamo
* Director April 19, 1999
- ---------------------------------------
John R. Snedegar
* Director April 19, 1999
- ---------------------------------------
Phillip E. Pearce
* Director April 19,1999
- ---------------------------------------
Daniel P. Ginns
* Director April 19, 1999
- ---------------------------------------
Barry W. Sullivan
* Director April 19, 1999
- ---------------------------------------
Anders B. Vinberg
/s/ Douglas S. Norman Director of Finance and April 19, 1999
- ---------------------------------------
Douglas S. Norman Chief Accounting Officer
* By: /s/ Douglas S. Norman
---------------------------------
Douglas S. Norman
Attorney-in-fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- -------------- -----------------------------------------------------------------
4.1 Form of Stock Purchase Agreement (Series H Preferred Stock).
Incorporated by reference to Exhibit 10.1 to the Company's
Report on Form 10-QSB for the period ended December 31,
1998.
4.2 Certificate of Designation (Series H Preferred Stock).
Incorporated by reference to Exhibit 10.2 to the Company's
Report on Form 10-QSB for the period ended December 31,
1998.
4.3 Form of Registration Rights Agreement (Series H Preferred
Stock). Incorporated by reference to Exhibit 10.3 to the
Company's Report on Form 10-QSB for the period ended
December 31, 1998.
4.4 Form of Warrant (Series H Preferred Stock and other warrants).
Incorporated by reference to Exhibit 10.4 to the Company's
Report on Form 10-QSB for the period ended December 31,
1998.
4.5 Form of Warrant (Silicon Valley Bank). Incorporated by reference
to Exhibit 5.1 to the original filing of this registration
statement, file number 333-72833.
4.6* Accounts Receivable Purchase Agreement with Silicon Valley
Bank.
4.7* Intellectual Property Security Agreement with Silicon Valley
Bank.
4.8* Consulting Agreement with Kurt Motamedi.
4.9* Consulting Agreement with Continental Capital & Equity Corp.
5.1* Opinion of Parker Chapin Flattau & Klimpl, LLP.
23.1 Consent of Parker Chapin Flattau & Klimpl, LLP (included in
Exhibit 5.1)
23.2+ Consent of PricewaterhouseCoopers, LLP
24.1 Powers of Attorney of certain directors and officers of
StarBase. Incorporated by reference to page II-5 of the original
filing of the registration statement, file number 333-72833.
- -------------------------
* Filed herewith.
+ To be filed by amendment.
E-1
EXHIBIT 4.6
[GRAPHIC OMITTED]
Silicon Valley Financial Services
A Division of Silicon Valley Bank
3003 Tasman Drive
Santa Clara, Ca. 95054
(408) 654-1000 - Fax (408) 980-6410
ACCOUNTS RECEIVABLE PURCHASE AGREEMENT
This Accounts Receivable Purchase Agreement (the "Agreement") is made
on this Nineteenth day of January 1999, by and between Silicon Valley Financial
Services (a division of Silicon Valley Bank) ("Buyer") having a place of
business at the address specified above and Starbase Corporation, a Delaware
corporation, ("Seller") having its principal place of business and chief
executive office at 4 Hutton Centre Drive, Suite 800, Santa Ana, California
92707.
1. Definitions. When used herein, the following terms shall have the following
meanings.
1.1. "Account Balance" shall mean, on any given day, the gross amount of
all Purchased Receivables unpaid on that day.
1.2. "Account Debtor" shall have the meaning set forth in the California
Uniform Commercial Code and shall include any person liable on any Purchased
Receivable, including without limitation, any guarantor of the Purchased
Receivable and any issuer of a letter of credit or banker's acceptance.
1.3. "Adjustments" shall mean all discounts, allowances, returns, disputes,
counterclaims, offsets, defenses, rights of recoupment, rights of return,
warranty claims, or short payments, asserted by or on behalf of any Account
Debtor with respect to any Purchased Receivable.
1.4. "Administrative Fee" shall have the meaning as set forth in Section
3.3 hereof.
1.5. "Advance" shall have the meaning set forth in Section 2.2 hereof.
1.6. "Collateral" shall have the meaning set forth in Section 8 hereof.
1.7. "Collections" shall mean all good funds received by Buyer from or on
behalf of an Account Debtor with respect to Purchased Receivables.
1.8 "Compliance Certificate" shall mean a certificate, in a form provided
by Buyer to Seller, which contains the certification of the chief financial
officer of Seller that, among other things, the representations and warranties
set forth in this Agreement are true and correct as of the date such certificate
is delivered.
1.9. "Event of Default" shall have the meaning set forth in Section 9
hereof.
1.10. "Finance Charges" shall have the meaning set forth in Section 3.2
hereof.
1.11. "Invoice Transmittal" shall mean a writing signed by an authorized
representative of Seller which accurately identifies the receivables which
Buyer, at its election, may purchase, and includes for each such receivable the
correct amount owed by the Account Debtor, the name and address of the Account
Debtor, the invoice number, the invoice date and the account code.
1.12. "Obligations" shall mean all advances, financial accommodations,
liabilities, obligations, covenants and duties owing, arising, due or payable by
Seller to Buyer of any kind or nature, present or future, arising under or in
connection with this Agreement or under any other document, instrument or
agreement, whether or not evidenced by any note, guarantee or other instrument,
whether arising on account or by overdraft, whether direct or indirect
(including those acquired by assignment) absolute or contingent, primary or
secondary, due or to become due, now owing or hereafter arising, and however
acquired; including, without limitation, all Advances, Finance Charges,
Administrative Fees, interest, Repurchase Amounts, fees, expenses, professional
fees and attorneys' fees and any other sums chargeable to Seller hereunder or
otherwise.
1.13. "Purchased Receivables" shall mean all those accounts, receivables,
chattel paper, instruments, contract rights, documents, general intangibles,
letters of credit, drafts, bankers acceptances, and rights to payment, and all
proceeds thereof (all of the foregoing being referred to as "receivables"),
arising out of the invoices and other agreements identified on or delivered with
any Invoice Transmittal delivered by Seller to Buyer which Buyer elects to
purchase and for which Buyer makes an Advance.
1.14. "Refund" shall have the meaning set forth in Section 3.5 hereof.
1.15. "Reserve" shall have the meaning set forth in Section 2.4 hereof.
1.16. "Repurchase Amount" shall have the meaning set forth in Section 4.2
hereof.
1.17. "Reconciliation Date" shall mean the last calendar day of each
Reconciliation Period.
1.18. "Reconciliation Period" shall mean each calendar month of every
year.
2. Purchase and Sale of Receivables.
2.1. Offer to Sell Receivables. During the term hereof, and provided that
there does not then exist any Event of Default or any event that with notice,
lapse of time or otherwise would constitute an Event of Default, Seller may
request that Buyer purchase receivables and Buyer may, in its sole discretion,
elect to purchase receivables. Seller shall deliver to Buyer an Invoice
Transmittal with respect to any receivable for which a request for purchase is
made. An authorized representative of Seller shall sign each Invoice Transmittal
delivered to Buyer. Buyer shall be entitled to rely on all the information
provided by Seller to Buyer on or with the Invoice Transmittal and to rely on
the signature on any Invoice Transmittal as an authorized signature of Seller.
2.2. Acceptance of Receivables. Buyer shall have no obligation to purchase
any receivable listed on an Invoice Transmittal. Buyer may exercise its sole
discretion in approving the credit of each Account Debtor before buying any
receivable. Upon acceptance by Buyer of all or any of the receivables described
on any Invoice Transmittal, Buyer shall pay to Seller 62 (%) percent of the face
amount of each receivable Buyer desires to purchase. Such payment shall be the
"Advance" with respect to such receivable. Buyer may, from time to time, in its
sole discretion, change the percentage of the Advance. Upon Buyer's acceptance
of the receivable and payment to Seller of the Advance, the receivable shall
become a "Purchased Receivable." It shall be a condition to each Advance that
(i) all of the representations and warranties set forth in Section 6 of this
Agreement be true and correct on and as of the date of the related Invoice
Transmittal and on and as of the date of such Advance as though made at and as
of each such date, and (ii) no Event of Default or any event or condition that
with notice, lapse of time or otherwise would constitute an Event of Default
shall have occurred and be continuing, or would result from such Advance.
Notwithstanding the foregoing, in no event shall the aggregate amount of all
Purchased Receivables outstanding at any time exceed Two Million and
No/100****** Dollars ($2,000,000.00).
2.3. Effectiveness of Sale to Buyer. Effective upon Buyer's payment of an
Advance, and for and in consideration therefor and in consideration of the
covenants of this Agreement, Seller hereby absolutely sells, transfers and
assigns to Buyer, all of Seller's right, title and interest in and to each
Purchased Receivable and all monies due or which may become due on or with
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respect to such Purchased Receivable. Buyer shall be the absolute owner of each
Purchased Receivable. Buyer shall have, with respect to any goods related to the
Purchased Receivable, all the rights and remedies of an unpaid seller under the
California Uniform Commercial Code and other applicable law, including the
rights of replevin, claim and delivery, reclamation and stoppage in transit.
2.4. Establishment of a Reserve. Upon the purchase by Buyer of each
Purchased Receivable, Buyer shall establish a reserve. The reserve shall be the
amount by which the face amount of the Purchased Receivable exceeds the Advance
on that Purchased Receivable (the "Reserve"); provided, the Reserve with respect
to all Purchased Receivables outstanding at any one time shall be an amount not
less than 38 (%) percent of the Account Balance at that time and may be set at a
higher percentage at Buyer's sole discretion. The reserve shall be a book
balance maintained on the records of Buyer and shall not be a segregated fund.
3. Collections, Charges and Remittances.
3.1. Collections. Upon receipt by Buyer of Collections, Buyer shall
promptly credit such Collections to Seller's Account Balance on a daily basis;
provided, that if Seller is in default under this Agreement, Buyer shall apply
all Collections to Seller's Obligations hereunder in such order and manner as
Buyer may determine. If an item of collection is not honored or Buyer does not
receive good funds for any reason, the amount shall be included in the Account
Balance as if the Collections had not been received and Finance Charges under
Section 3.2 shall accrue thereon.
3.2. Finance Charges. On each Reconciliation Date Seller shall pay to Buyer
a finance charge in an amount equal to 1.25 (%) percent per month of the average
daily Account Balance outstanding during the applicable Reconciliation Period
(the "Finance Charges"). Buyer shall deduct the accrued Finance Charges from the
Reserve as set forth in Section 3.5 below.
3.3. Administrative Fee. On each Reconciliation Date Seller shall pay to
Buyer an Administrative Fee equal to .25 (%) percent of the face amount of each
Purchased Receivable first purchased during that Reconciliation Period (the
"Administrative Fee"). Buyer shall deduct the Administrative Fee from the
Reserve as set forth in Section 3.5 below.
3.4. Accounting. Buyer shall prepare and send to Seller after the close of
business for each Reconciliation Period, an accounting of the transactions for
that Reconciliation Period, including the amount of all Purchased Receivables,
all Collections, Adjustments, Finance Charges, and the Administrative Fee. The
accounting shall be deemed correct and conclusive unless Seller makes written
objection to Buyer within thirty (30) days after the Buyer mails the accounting
to Seller.
3.5. Refund to Seller. Provided that there does not then exist an Event of
Default or any event or condition that with notice, lapse of time or otherwise
would constitute an Event of Default, Buyer shall refund to Seller by check
after the Reconciliation Date, the amount, if any, which Buyer owes to Seller at
the end of the Reconciliation Period according to the accounting prepared by
Buyer for that Reconciliation Period (the "Refund"). The Refund shall be an
amount equal to:
(A) (1) The Reserve as of the beginning of that Reconciliation Period,
plus
(2) the Reserve created for each Purchased Receivable purchased
during that Reconciliation Period,
minus
(B) The total for that Reconciliation Period of:
(1) the Administrative Fee;
(2) Finance Charges;
(3) Adjustments;
(4) Repurchase Amounts, to the extent Buyer has agreed to accept
payment thereof by deduction from the Refund;
(5) the Reserve for the Account Balance as of the first day of the
following Reconciliation Period in the minimum percentage set
forth in Section 2.4 hereof; and
(6) all amounts due, including reasonable professional fees and
expenses, as set forth in Section 12 for which oral or written demand has been
made by Buyer to Seller during that Reconciliation Period to the extent Buyer
has agreed to accept payment thereof by deduction from the Refund. In the event
the formula set forth in this Section 3.5 results in an amount due to Buyer from
Seller, Seller shall make such payment in the same manner as set forth in
Section 4.3 hereof for repurchases. If the formula set forth in this Section 3.5
results in an amount due to Seller from Buyer, Buyer shall make such payment by
check, subject to Buyer's rights under Section 4.3 and Buyer's rights of offset
and recoupment.
4. Recourse and Repurchase Obligations.
4.1. Recourse. Buyer's acquisition of Purchased Receivables from Seller
shall be with full recourse against Seller. In the event the Obligations exceed
the amount of Purchased Receivables and Collateral, Seller shall be liable for
any deficiency.
4.2. Seller's Agreement to Repurchase. Seller agrees to pay to Buyer on
demand, the full face amount, or any unpaid portion, of any Purchased
Receivable:
(A) which remains unpaid ninety (90) calendar days after the invoice
date; or
(B) which is owed by any Account Debtor who has filed, or has had filed
against it, any bankruptcy case, assignment for the benefit of creditors,
receivership, or insolvency proceeding or who has become insolvent (as defined
in the United States Bankruptcy Code) or who is generally not paying its debts
as such debts become due; or
(C) with respect to which there has been any breach of warranty or
representation set forth in Section 6 hereof or any breach of any covenant
contained in this Agreement; or
(D) with respect to which the Account Debtor asserts any discount,
allowance, return, dispute, counterclaim, offset, defense, right of recoupment,
right of return, warranty claim, or short payment;
together with all reasonable attorneys' and professional fees and expenses and
all court costs incurred by Buyer in collecting such Purchased Receivable and/or
enforcing its rights under, or collecting amounts owed by Seller in connection
with, this Agreement (collectively, the "Repurchase Amount").
4.3. Seller's Payment of the Repurchase Amount or Other Amounts Due Buyer.
When any Repurchase Amount or other amount owing to Buyer becomes due, Buyer
shall inform Seller of the manner of payment which may be any one or more of the
following in Buyer's sole discretion: (a) in cash immediately upon demand
therefor; (b) by delivery of substitute invoices and an Invoice Transmittal
acceptable to Buyer which shall thereupon become Purchased Receivables; (c) by
adjustment to the Reserve pursuant to Section 3.5 hereof; (d) by deduction from
or offset against the Refund that would otherwise be due and payable to Seller;
(e) by deduction from or offset against the amount that otherwise would be
forwarded to Seller in respect of any further Advances that may be made by
Buyer; or (f) by any combination of the foregoing as Buyer may from time to time
choose.
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4.4. Seller's Agreement to Repurchase All Purchased Receivables. Upon and
after the occurrence of an Event of Default, Seller shall, upon Buyer's demand
(or, in the case of an Event of Default under Section 9(B), immediately without
notice or demand from Buyer) repurchase all the Purchased Receivables then
outstanding , or such portion thereof as Buyer may demand. Such demand may, at
Buyer's option, include and Seller shall pay to Buyer immediately upon demand,
cash in an amount equal to the Advance with respect to each Purchased Receivable
then outstanding together with all accrued Finance Charges, Adjustments,
Administrative Fees, attorney's and professional fees, court costs and expenses
as provided for herein, and any other Obligations. Upon receipt of payment in
full of the Obligations, Buyer shall immediately instruct Account Debtors to pay
Seller directly, and return to Seller any Refund due to Seller. For the purpose
of calculating any Refund due under this Section only, the Reconciliation Date
shall be deemed to be the date Buyer receives payment in good funds of all the
Obligations as provided in this Section 4.4.
5. Power of Attorney. Seller does hereby irrevocably appoint Buyer and its
successors and assigns as Seller's true and lawful attorney in fact, and hereby
authorizes Buyer, regardless of whether there has been an Event of Default, (a)
to sell, assign, transfer, pledge, compromise, or discharge the whole or any
part of the Purchased Receivables; (b) to demand, collect, receive, sue, and
give releases to any Account Debtor for the monies due or which may become due
upon or with respect to the Purchased Receivables and to compromise, prosecute,
or defend any action, claim, case or proceeding relating to the Purchased
Receivables, including the filing of a claim or the voting of such claims in any
bankruptcy case, all in Buyer's name or Seller's name, as Buyer may choose; (c)
to prepare, file and sign Seller's name on any notice, claim, assignment,
demand, draft, or notice of or satisfaction of lien or mechanics' lien or
similar document with respect to Purchased Receivables; (d) to notify all
Account Debtors with respect to the Purchased Receivables to pay Buyer directly;
(e) to receive, open, and dispose of all mail addressed to Seller for the
purpose of collecting the Purchased Receivables; (f) to endorse Seller's name on
any checks or other forms of payment on the Purchased Receivables; (g) to
execute on behalf of Seller any and all instruments, documents, financing
statements and the like to perfect Buyer's interests in the Purchased
Receivables and Collateral; and (h) to do all acts and things necessary or
expedient, in furtherance of any such purposes. If Buyer receives a check or
item which is payment for both a Purchased Receivable and another receivable,
the funds shall first be applied to the Purchased Receivable and, so long as
there does not exist an Event of Default or an event that with notice, lapse of
time or otherwise would constitute an Event of Default, the excess shall be
remitted to Seller. Upon the occurrence and continuation of an Event of Default,
all of the power of attorney rights granted by Seller to Buyer hereunder shall
be applicable with respect to all Purchased Receivables and all Collateral.
6. Representations, Warranties and Covenants.
6.1. Receivables' Warranties, Representations and Covenants. To induce
Buyer to buy receivables and to render its services to Seller, and with full
knowledge that the truth and accuracy of the following are being relied upon by
the Buyer in determining whether to accept receivables as Purchased Receivables,
Seller represents, warrants, covenants and agrees, with respect to each Invoice
Transmittal delivered to Buyer and each receivable described therein, that:
(A) Seller is the absolute owner of each receivable set forth in the
Invoice Transmittal and has full legal right to sell, transfer and assign such
receivables;
(B) The correct amount of each receivable is as set forth in the
Invoice Transmittal and is not in dispute;
(C) The payment of each receivable is not contingent upon the
fulfillment of any obligation or contract, past or future and any and all
obligations required of the Seller have been fulfilled as of the date of the
Invoice Transmittal;
(D) Each receivable set forth on the Invoice Transmittal is based on an
actual sale and delivery of goods and/or
services actually rendered, is presently due and owing to Seller, is
not past due or in default, has not been previously sold, assigned, transferred,
or pledged, and is free of any and all liens, security interests and
encumbrances other than liens, security interests or encumbrances in favor of
Buyer or any other division or affiliate of Silicon Valley Bank;
(E) There are no defenses, offsets, or counterclaims against any of the
receivables, and no agreement has been made under which the Account Debtor may
claim any deduction or discount, except as otherwise stated in the Invoice
Transmittal;
(F) Each Purchased Receivable shall be the property of the Buyer and
shall be collected by Buyer, but if for any
reason it should be paid to Seller, Seller shall promptly notify Buyer
of such payment, shall hold any checks, drafts, or monies so received in trust
for the benefit of Buyer, and shall promptly transfer and deliver the same to
the Buyer;
(G) Buyer shall have the right of endorsement, and also the right to
require endorsement by Seller, on all payments received in connection with each
Purchased Receivable and any proceeds of Collateral;
(H) Seller, and to Seller's best knowledge, each Account Debtor set
forth in the Invoice Transmittal, are and shall remain solvent as that term is
defined in the United States Bankruptcy Code and the California Uniform
Commercial Code, and no such Account Debtor has filed or had filed against it a
voluntary or involuntary petition for relief under the United States Bankruptcy
Code;
(I) Each Account Debtor named on the Invoice Transmittal will not
object to the payment for, or the quality or the quantity of the subject matter
of, the receivable and is liable for the amount set forth on the Invoice
Transmittal;
(J) Each Account Debtor shall promptly be notified, after acceptance by
Buyer, that the Purchased Receivable has been transferred to and is payable to
Buyer, and Seller shall not take or permit any action to countermand such
notification; and
(K) All receivables forwarded to and accepted by Buyer after the date
hereof, and thereby becoming Purchased Receivables, shall comply with each and
every one of the foregoing representations, warranties, covenants and agreements
referred to above in this Section 6.1.
6.2. Additional Warranties, Representations and Covenants. In addition to
the foregoing warranties, representations and covenants, to induce Buyer to buy
receivables and to render its services to Seller, Seller hereby represents,
warrants, covenants and agrees that:
(A) Seller will not assign, transfer, sell, or grant , or permit any
lien or security interest in any Purchased Receivables or Collateral to or in
favor of any other party, without Buyer's prior written consent;
(B) The Seller's name, form of organization, chief executive office,
and the place where the records concerning all Purchased Receivables and
Collateral are kept is set forth at the beginning of this Agreement, Collateral
is located only at the location set forth in the beginning of this Agreement,
or, if located at any additional location, as set forth on a schedule attached
to this Agreement, and Seller will give Buyer at least thirty (30) days prior
written notice if such name, organization, chief executive office or other
locations of Collateral or records concerning Purchased Receivables or
Collateral is changed or added and shall execute any documents necessary to
perfect Buyer's interest in the Purchased Receivables and the Collateral;
(C) Seller shall (i) pay all of its normal gross payroll for employees,
and all federal and state taxes, as and when due, including without limitation
all payroll and withholding taxes and state sales taxes; (ii) deliver at any
time and from time to time at Buyer's request, evidence satisfactory to Buyer
that all such amounts have been paid to the proper taxing authorities; and (iii)
if requested by Buyer, pay its payroll and related taxes through a bank or an
independent payroll service acceptable to Buyer.
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(D) Seller has not, as of the time Seller delivers to Buyer an Invoice
Transmittal, or as of the time Seller accepts any Advance from Buyer, filed a
voluntary petition for relief under the United States Bankruptcy Code or had
filed against it an involuntary petition for relief;
(E) If Seller owns, holds or has any interest in, any copyrights
(whether registered, or unregistered), patents or trademarks, and licenses of
any of the foregoing, such interest has been disclosed to Buyer and is
specifically listed and identified on a schedule to this Agreement, and Seller
shall immediately notify Buyer if Seller hereafter obtains any interest in any
additional copyrights, patents, trademarks or licenses that are significant in
value or are material to the conduct of its business;
(F) Seller shall provide Buyer with a Compliance Certificate (i) on a
quarterly basis to be received by Buyer no later than the fifth calendar day
following each calendar quarter, and; (ii) on a more frequent or other basis if
and as requested by Buyer; and (G) Seller shall provide Buyer with a deferred
revenue listing upon Buyer's request.
7. Adjustments. In the event of a breach of any of the representations,
warranties, or covenants set forth in Section 6.1, or in the event any
Adjustment or dispute is asserted by any Account Debtor, Seller shall promptly
advise Buyer and shall, subject to the Buyer's approval, resolve such disputes
and advise Buyer of any adjustments. Unless the disputed Purchased Receivable is
repurchased by Seller and the full Repurchase Amount is paid, Buyer shall remain
the absolute owner of any Purchased Receivable which is subject to Adjustment or
repurchase under Section 4.2 hereof, and any rejected, returned, or recovered
personal property, with the right to take possession thereof at any time. If
such possession is not taken by Buyer, Seller is to resell it for Buyer's
account at Seller's expense with the proceeds made payable to Buyer. While
Seller retains possession of said returned goods, Seller shall segregate said
goods and mark them "property of Silicon Valley Financial Services."
8. Security Interest. To secure the prompt payment and performance to Buyer of
all of the Obligations, Seller hereby grants to Buyer a continuing lien upon and
security interest in all of Seller's now existing or hereafter arising rights
and interest in the following , whether now owned or existing or hereafter
created, acquired, or arising, and wherever located (collectively, the
"Collateral"):
(A) All accounts, receivables, contract rights, chattel paper,
instruments, documents, letters of credit, bankers acceptances, drafts, checks,
cash, securities, and general intangibles (including, without limitation, all
claims, causes of action, deposit accounts, guaranties, rights in and claims
under insurance policies (including rights to premium refunds), rights to tax
refunds, copyrights, patents, trademarks, rights in and under license
agreements, and all other intellectual property);
(B) All inventory, including Seller's rights to any returned or
rejected goods, with respect to which Buyer shall have all the rights of any
unpaid seller, including the rights of replevin, claim and delivery,
reclamation, and stoppage in transit;
(C) All monies, refunds and other amounts due Seller, including,
without limitation, amounts due Seller under this Agreement (including Seller's
right of offset and recoupment);
(D) All equipment, machinery, furniture, furnishings, fixtures, tools,
supplies and motor vehicles;
(E) All farm products, crops, timber, minerals and the like (including
oil and gas);
(F) All accessions to, substitutions for, and replacements of, all of
the foregoing;
(G) All books and records pertaining to all of the foregoing; and
(H) All proceeds of the foregoing, whether due to voluntary or
involuntary disposition, including insurance proceeds.
Seller is not authorized to sell, assign, transfer or otherwise convey
any Collateral without Buyer's prior written consent, except for the sale of
finished inventory in the Seller's usual course of business. Seller agrees to
sign UCC financing statements, in a form acceptable to Buyer, and any other
instruments and documents requested by Buyer to evidence , perfect, or protect
the interests of Buyer in the Collateral. Seller agrees to deliver to Buyer the
originals of all instruments, chattel paper and documents evidencing or related
to Purchased Receivables and Collateral.
9. Default. The occurrence of any one or more of the following shall
constitute an Event of Default hereunder.
(A) Seller fails to pay any amount owed to Buyer as and when due;
(B) There shall be commenced by or against Seller any voluntary or
involuntary case under the United States Bankruptcy Code, or any assignment for
the benefit of creditors, or appointment of a receiver or custodian for any of
its assets;
(C) Seller shall become insolvent in that its debts are greater than
the fair value of its assets, or Seller is generally not paying its debts as
they become due or is left with unreasonably small capital;
(D) Any involuntary lien, garnishment, attachment or the like is issued
against or attaches to the Purchased Receivables or any Collateral;
(E) Seller shall breach any covenant, agreement, warranty, or
representation set forth herein, and the same is not cured to Buyer's
satisfaction within ten (10) days after Buyer has given Seller oral or written
notice thereof; provided, that if such breach is incapable of being cured it
shall constitute an immediate default hereunder;
(F) Seller is not in compliance with, or otherwise is in default under,
any term of any document, instrument or agreement evidencing a debt, obligation
or liability of any kind or character of Seller, now or hereafter existing, in
favor of Buyer or any division or affiliate of Silicon Valley Bank, regardless
of whether such debt, obligation or liability is direct or indirect, primary or
secondary, joint, several or joint and several, or fixed or contingent, together
with any and all renewals and extensions of such debts, obligations and
liabilities, or any part thereof;
(G) An event of default shall occur under any guaranty executed by any
guarantor of the Obligations of Seller to Buyer under this Agreement, or any
material provision of any such guaranty shall for any reason cease to be valid
or enforceable or any such guaranty shall be repudiated or terminated, including
by operation of law;
(H) A default or event of default shall occur under any agreement
between Seller and any creditor of Seller that has entered into a subordination
agreement with Buyer; or
(I) Any creditor that has entered into a subordination agreement with
Buyer shall breach any of the terms of or not comply with such subordination
agreement.
10. Remedies Upon Default. Upon the occurrence of an Event of Default, (1)
without implying any obligation to buy receivables, Buyer may cease buying
receivables or extending any financial accommodations to Seller; (2) all or a
portion of the Obligations shall be, at the option of and upon demand by Buyer,
or with respect to an Event of Default described in Section 9(B), automatically
and without notice or demand, due and payable in full; and (3) Buyer shall have
and may exercise all the rights and remedies under this Agreement and under
applicable law, including the rights and remedies of a secured party under the
California Uniform Commercial Code, all the power of attorney rights described
in Section 5 with respect to all Collateral, and the right to collect, dispose
of, sell, lease, use, and realize upon all Purchased Receivables and all
Collateral in any commercial reasonable manner. Seller and Buyer agree that any
notice of sale required to be given to Seller shall be deemed to be reasonable
if given five (5) days prior to the date on or after which the sale may be held.
In the event that the Obligations are accelerated hereunder, Seller shall
repurchase all of the Purchased Receivables as set forth in Section 4.4.
11. Accrual of Interest. If any amount owed by Seller hereunder is not paid when
due, including, without limitation, amounts due under Section 3.5, Repurchase
Amounts, amounts due under Section 12, and any other Obligations, such
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amounts shall bear interest at a per annum rate equal to the per annum rate of
the Finance Charges until the earlier of (i) payment in good funds or (ii) entry
of a final judgment thereof, at which time the principal amount of any money
judgment remaining unsatisfied shall accrue interest at the highest rate allowed
by applicable law.
12. Fees, Costs and Expenses; Indemnification. The Seller will pay to Buyer
immediately upon demand all fees, costs and expenses (including reasonable fees
of attorneys and professionals and their costs and expenses ) that Buyer incurs
or may from time to time impose in connection with any of the following: (a)
preparing, negotiating , administering, and enforcing this Agreement or any
other agreement executed in connection herewith, including any amendments,
waivers or consents in connection with any of the foregoing, (b) any litigation
or dispute (whether instituted by Buyer, Seller or any other person) in any way
relating to the Purchased Receivables, the Collateral, this Agreement or any
other agreement executed in connection herewith or therewith, (d) enforcing any
rights against Seller or any guarantor, or any Account Debtor, (e) protecting or
enforcing its interest in the Purchased Receivables or the Collateral, (f)
collecting the Purchased Receivables and the Obligations, and (g) the
representation of Buyer in connection with any bankruptcy case or insolvency
proceeding involving Seller, any Purchased Receivable, the Collateral, any
Account Debtor, or any guarantor. Seller shall indemnify and hold Buyer harmless
from and against any and all claims, actions, damages, costs, expenses, and
liabilities of any nature whatsoever arising in connection with any of the
foregoing.
13. Severability, Waiver, and Choice of Law. In the event that any provision of
this Agreement is deemed invalid by reason of law, this Agreement will be
construed as not containing such provision and the remainder of the Agreement
shall remain in full force and effect. Buyer retains all of its rights, even if
it makes an Advance after an Event of Default. If Buyer waives an Event of
Default, it may enforce a later Event of Default. Any consent or waiver under,
or amendment of, this Agreement must be in writing. Nothing contained herein, or
any action taken or not taken by Buyer at any time, shall be construed at any
time to be indicative of any obligation or willingness on the part of Buyer to
amend this Agreement or to grant to Seller any waivers or consents. This
Agreement has been transmitted by Seller to Buyer at Buyer's office in the State
of California and has been executed and accepted by Buyer in the State of
California. This Agreement shall be governed by and interpreted in accordance
with the internal laws of the State of California.
14. Account Collection Services. Certain Account Debtors may require or prefer
that all of Seller's receivables be paid to the same address and/or party, or
Seller and Buyer may agree that all receivables with respect to certain Account
Debtors be paid to one party. In such event Buyer and Seller may agree that
Buyer shall collect all receivables whether owned by Seller or Buyer and
(provided that there does not then exist an Event of Default or event that with
notice, lapse or time or otherwise would constitute an Event of Default, and
subject to Buyer's rights in the Collateral) Buyer agrees to remit to Seller the
amount of the receivables collections it receives with respect to receivables
other than Purchased Receivables. It is understood and agreed by Seller that
this Section does not impose any affirmative duty on Buyer to do any act other
than to turn over such amounts. All such receivables and collections are
Collateral and in an Event of Default hereunder, Buyer shall have no duty to
remit collections of Collateral and may apply such collections to the
obligations hereunder and Buyer shall have the rights of a secured party under
the California Uniform Commercial Code.
15. Notices. All notices shall be given to Buyer and Seller at the addresses or
faxes set forth on the first page of this Agreement and shall be deemed to have
been delivered and received: (a) if mailed, three (3) calendar days after
deposited in the United States mail, first class, postage pre-paid, (b) one (1)
calendar day after deposit with an overnight mail or messenger service; or (c)
on the same date of confirmed transmission if sent by hand delivery, telecopy,
telefax or telex during normal business hours.
16. Jury Trial. SELLER AND BUYER EACH HEREBY (a) WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL ON ANY CLAIM OR ACTION ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, ANY RELATED AGREEMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY; (b) RECOGNIZE AND AGREE THAT THE FOREGOING WAIVER CONSTITUTES
A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT; AND (c) REPRESENT AND
WARRANT THAT IT HAS REVIEWED THIS WAIVER, HAS DETERMINED FOR ITSELF THE
NECESSITY TO REVIEW THE SAME WITH ITS LEGAL COUNSEL, AND KNOWINGLY AND
VOLUNTARILY WAIVES ALL RIGHTS TO A JURY TRIAL.
17. Term and Termination. The term of this Agreement shall be for one (1) year
from the date hereof, and from year to year thereafter unless terminated in
writing by Buyer or Seller. Seller and Buyer shall each have the right to
terminate this Agreement at any time. Notwithstanding the foregoing, any
termination of this Agreement shall not affect Buyer's security interest in the
Collateral and Buyer's ownership of the Purchased Receivables, and this
Agreement shall continue to be effective, and Buyer's rights and remedies
hereunder shall survive such termination, until all transactions entered into
and Obligations incurred hereunder or in connection herewith have been completed
and satisfied in full.
18. Titles and Section Headings. The titles and section headings used herein are
for convenience only and shall not be used in interpreting this Agreement.
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19. Other Agreements. The terms and provisions of this Agreement shall not
adversely affect the rights of Buyer or any other division or affiliate of
Silicon Valley Bank under any other document, instrument or agreement. The terms
of such other documents, instruments and agreements shall remain in full force
and effect notwithstanding the execution of this Agreement. In the event of a
conflict between any provision of this Agreement and any provision of any other
document, instrument or agreement between Seller on the one hand, and Buyer or
any other division or affiliate of Silicon Valley Bank on the other hand, Buyer
shall determine in its sole discretion which provision shall apply. Seller
acknowledges specifically that any security agreements, liens and/or security
interests currently securing payment of any obligations of Seller owing to Buyer
or any other division or affiliate of Silicon Valley Bank also secure Seller's
obligations under this Agreement, and are valid and subsisting and are not
adversely affected by execution of this Agreement. Seller further acknowledges
that (a) any collateral under other outstanding security agreements or other
documents between Seller and Buyer or any other division or affiliate of Silicon
Valley Bank secures the obligations of Seller under this Agreement and (b) a
default by Seller under this Agreement constitutes a default under other
outstanding agreements between Seller and Buyer or any other division or
affiliate of Silicon Valley Bank.
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement on the
day and year above written.
SELLER: Starbase Corporation
By _______________________________________
Title _____________________________________
BUYER: SILICON VALLEY FINANCIAL SERVICES
A division of Silicon Valley Bank
By________________________________________
Title ______________________________________
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<TABLE>
<CAPTION>
This FINANCING STATEMENT is presented for filing and will remain effective,
with certain exceptions, for five years from the date of filing, pursuant to
Section 9403 of the California Uniform Commercial Code.
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. DEBTOR (Last Name First - If An Individual) 1A.Soc Sec No or Id No.
Starbase Corporation 33-0567363
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
4 Hutton Centre Drive, Suite 800 Santa Ana, California 92707
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF ANY) (Last Name First - If An Individual) 2A.Soc Sec No or Id No.
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FED TAX NO.
33-0567363
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A.Soc Sec No or Id No.
Name: SILICON VALLEY BANK/Silicon Valley Financial
Services
Mailing Address: 3003 Tasman Drive, Mail Sort NC481
Santa Clara, California 95054
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY 5A.Soc Sec No or Id No.
Name: None
Mailing Address:
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
6. This FINANCING STATEMENT covers the following types or items of property
(include description of real property on which located and owner of record when
required by instruction 4).
Debtor hereby grants Secured Party a security interest in all of the following,
whether now owned or hereafter acquired, and wherever located, as collateral
for the payment and performance of all present and future indebtedness,
liabilities, guarantees and obligations of Debtor to Secured Party: All
"accounts," "general intangibles," "chattel paper," "documents," "letters of
credit," "instruments," "deposit accounts," "inventory," "farm products,"
"fixtures" and "equipment," as such terms are defined in Division 9 of the
California Uniform Commercial Code in effect on the date hereof, and all other
types or items of property described on Exhibit A hereto (but this Financing
Statement shall be fully effective notwithstanding any lack of any Exhibit A).
Debtor is not authorized to sell, transfer, or further encumber any of the
foregoing collateral, except for the sale of finished inventory in the ordinary
course of business.
- -----------------------------------------------------------------------------------------------------------------------------
7. CHECK IF APPLICABLE: X-PRODUCTS OF COLLATERAL ARE ALSO COVERED.
- -----------------------------------------------------------------------------------------------------------------------------
SIGNATURE(S) OF DEBTOR: DATE:April 19, 1999 C THIS SPACE FOR USE OF FILING OFFICER
Starbase Corporation O (DATE, TIME, FILE NUMBER AND FILING
D OFFICER)
E
By__________________________________
Title________________________________ 1
- ------------------------------------------------------------------------ 2
SIGNATURE(S) OF SECURED PARTY:
SILICON VALLEY BANK/Silicon Valley Financial Services 3
4
By__________________________________
Title________________________________ 5
- ------------------------------------------------------------------------ 6
RETURN COPY TO:
7
SILICON VALLEY BANK
3003 Tasman Drive Mail Sort NC481 8
Santa Clara, California 95054
9
0
- -----------------------------------------------------------------------------------------------------------------------------
1) Filing Officer Copy Form UCC-1
</TABLE>
Page 7
<PAGE>
<TABLE>
<CAPTION>
This FINANCING STATEMENT is presented for filing and will remain effective, with
certain exceptions, for five years from the date of filing, pursuant to Section
9403 of the California Uniform Commercial Code.
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. DEBTOR (Last Name First - If An Individual) 1A.Soc Sec No or Id No.
Starbase Corporation 33-0567363
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
4 Hutton Centre Drive, Suite 800 Santa Ana, California 92707
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF ANY) (Last Name First - If An Individual) 2A.Soc Sec No or Id No.
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FED TAX NO.
33-0567363
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A.Soc Sec No or Id No.
Name: SILICON VALLEY BANK/Silicon Valley Financial
Services
Mailing Address: 3003 Tasman Drive, Mail Sort NC481
Santa Clara, California 95054
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY 5A.Soc Sec No or Id No.
Name: None
Mailing Address:
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
6. This FINANCING STATEMENT covers the following types or items of property
(include description of real property on which located and owner of record when
required by instruction 4).
Debtor hereby grants Secured Party a security interest in all of the following,
whether now owned or hereafter acquired, and wherever located, as collateral
for the payment and performance of all present and future indebtedness,
liabilities, guarantees and obligations of Debtor to Secured Party: All
"accounts," "general intangibles," "chattel paper," "documents," "letters of
credit," "instruments," "deposit accounts," "inventory," "farm products,"
"fixtures" and "equipment," as such terms are defined in Division 9 of the
California Uniform Commercial Code in effect on the date hereof, and all other
types or items of property described on Exhibit A hereto (but this Financing
Statement shall be fully effective notwithstanding any lack of any Exhibit A).
Debtor is not authorized to sell, transfer, or further encumber any of the
foregoing collateral, except for the sale of finished inventory in the ordinary
course of business.
- -----------------------------------------------------------------------------------------------------------------------------
7. CHECK IF APPLICABLE: X-PRODUCTS OF COLLATERAL ARE ALSO COVERED.
- -----------------------------------------------------------------------------------------------------------------------------
SIGNATURE(S) OF DEBTOR: DATE:April 19, 1999 C THIS SPACE FOR USE OF FILING OFFICER
Starbase Corporation O (DATE, TIME, FILE NUMBER AND FILING
D OFFICER)
E
By__________________________________
Title________________________________ 1
- ------------------------------------------------------------------------ 2
SIGNATURE(S) OF SECURED PARTY:
SILICON VALLEY BANK/Silicon Valley Financial Services 3
4
By__________________________________
Title________________________________ 5
- ------------------------------------------------------------------------ 6
RETURN COPY TO:
7
SILICON VALLEY BANK
3003 Tasman Drive Mail Sort NC481 8
Santa Clara, California 95054
9
0
- -----------------------------------------------------------------------------------------------------------------------------
(2) Filing Officer Copy-Acknowledgment Form UCC-1
</TABLE>
Page 8
<PAGE>
<TABLE>
<CAPTION>
This FINANCING STATEMENT is presented for filing and will remain effective, with
certain exceptions, for five years from the date of filing, pursuant to Section
9403 of the California Uniform Commercial Code.
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. DEBTOR (Last Name First - If An Individual) 1A.Soc Sec No or Id No.
Starbase Corporation 33-0567363
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
4 Hutton Centre Drive, Suite 800 Santa Ana, California 92707
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF ANY) (Last Name First - If An Individual) 2A.Soc Sec No or Id No.
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FED TAX NO.
33-0567363
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A.Soc Sec No or Id No.
Name: SILICON VALLEY BANK/Silicon Valley Financial
Services
Mailing Address: 3003 Tasman Drive, Mail Sort NC481
Santa Clara, California 95054
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY 5A.Soc Sec No or Id No.
Name: None
Mailing Address:
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
6. This FINANCING STATEMENT covers the following types or items of property
(include description of real property on which located and owner of record when
required by instruction 4).
Debtor hereby grants Secured Party a security interest in all of the following,
whether now owned or hereafter acquired, and wherever located, as collateral
for the payment and performance of all present and future indebtedness,
liabilities, guarantees and obligations of Debtor to Secured Party: All
"accounts," "general intangibles," "chattel paper," "documents," "letters of
credit," "instruments," "deposit accounts," "inventory," "farm products,"
"fixtures" and "equipment," as such terms are defined in Division 9 of the
California Uniform Commercial Code in effect on the date hereof, and all other
types or items of property described on Exhibit A hereto (but this Financing
Statement shall be fully effective notwithstanding any lack of any Exhibit A).
Debtor is not authorized to sell, transfer, or further encumber any of the
foregoing collateral, except for the sale of finished inventory in the ordinary
course of business.
- -----------------------------------------------------------------------------------------------------------------------------
7. CHECK IF APPLICABLE: X-PRODUCTS OF COLLATERAL ARE ALSO COVERED.
- -----------------------------------------------------------------------------------------------------------------------------
SIGNATURE(S) OF DEBTOR: DATE:April 19, 1999 C THIS SPACE FOR USE OF FILING OFFICER
Starbase Corporation O (DATE, TIME, FILE NUMBER AND FILING
D OFFICER)
E
By__________________________________
Title________________________________ 1
- ------------------------------------------------------------------------ 2
SIGNATURE(S) OF SECURED PARTY:
SILICON VALLEY BANK/Silicon Valley Financial Services 3
4
By__________________________________
Title________________________________ 5
- ------------------------------------------------------------------------ 6
RETURN COPY TO:
7
SILICON VALLEY BANK
3003 Tasman Drive Mail Sort NC481 8
Santa Clara, California 95054
9
0
- -----------------------------------------------------------------------------------------------------------------------------
(3) File Copy - Secured Party Form UCC-1
</TABLE>
Page 9
<PAGE>
<TABLE>
<CAPTION>
This FINANCING STATEMENT is presented for filing and will remain
effective, with certain exceptions, for five years from the date of filing,
pursuant to Section 9403 of the California Uniform Commercial Code.
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. DEBTOR (Last Name First - If An Individual) 1A.Soc Sec No or Id No.
Starbase Corporation 33-0567363
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
4 Hutton Centre Drive, Suite 800 Santa Ana, California 92707
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF ANY) (Last Name First - If An Individual) 2A.Soc Sec No or Id No.
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FED TAX NO.
33-0567363
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A.Soc Sec No or Id No.
Name: SILICON VALLEY BANK/Silicon Valley Financial
Services
Mailing Address: 3003 Tasman Drive, Mail Sort NC481
Santa Clara, California 95054
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY 5A.Soc Sec No or Id No.
Name: None
Mailing Address:
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
6. This FINANCING STATEMENT covers the following types or items of property
(include description of real property on which located and owner of record when
required by instruction 4).
Debtor hereby grants Secured Party a security interest in all of the following,
whether now owned or hereafter acquired, and wherever located, as collateral
for the payment and performance of all present and future indebtedness,
liabilities, guarantees and obligations of Debtor to Secured Party: All
"accounts," "general intangibles," "chattel paper," "documents," "letters of
credit," "instruments," "deposit accounts," "inventory," "farm products,"
"fixtures" and "equipment," as such terms are defined in Division 9 of the
California Uniform Commercial Code in effect on the date hereof, and all other
types or items of property described on Exhibit A hereto (but this Financing
Statement shall be fully effective notwithstanding any lack of any Exhibit A).
Debtor is not authorized to sell, transfer, or further encumber any of the
foregoing collateral, except for the sale of finished inventory in the ordinary
course of business.
- -----------------------------------------------------------------------------------------------------------------------------
7. CHECK IF APPLICABLE: X-PRODUCTS OF COLLATERAL ARE ALSO COVERED.
- -----------------------------------------------------------------------------------------------------------------------------
SIGNATURE(S) OF DEBTOR: DATE:April 19, 1999 C THIS SPACE FOR USE OF FILING OFFICER
Starbase Corporation O (DATE, TIME, FILE NUMBER AND FILING
D OFFICER)
E
By__________________________________
Title________________________________ 1
- ------------------------------------------------------------------------ 2
SIGNATURE(S) OF SECURED PARTY:
SILICON VALLEY BANK/Silicon Valley Financial Services 3
4
By__________________________________
Title________________________________ 5
- ------------------------------------------------------------------------ 6
RETURN COPY TO:
7
SILICON VALLEY BANK
3003 Tasman Drive Mail Sort NC481 8
Santa Clara, California 95054
9
0
- -----------------------------------------------------------------------------------------------------------------------------
(4) File Copy - Debtor Form UCC-1
</TABLE>
Page 10
<PAGE>
EXHIBIT "A"
TO FINANCING STATEMENT AND SECURITY AGREEMENT
This FINANCING STATEMENT and SECURITY AGREEMENT covers the following types or
items of property (in addition to, and without limiting the types of property
set forth on page 1 hereof):
A) All accounts, receivables, contract rights, chattel paper, instruments,
documents, letters of credit, bankers acceptances, drafts, checks,
cash, securities, deposit accounts, and general intangibles (including,
without limitation, all claims, causes of action, guaranties, rights in
and claims under insurance policies (including rights to premium
refunds), rights to tax refunds, copyrights, patents, trademarks,
rights in and under license agreements, and all other intellectual
property);
B) All inventory, including Seller's rights to any returned or rejected
goods, with respect to which Buyer shall have all the rights of any
unpaid seller, including the rights of replevin, claim and delivery,
reclamation, and stoppage in transit;
C) All monies, refunds and other amounts due Seller, including, without
limitation, amounts due Seller under this Agreement (including Seller's
right of offset and recoupment);
D) All equipment, machinery, furniture, furnishings, fixtures, tools,
supplies and motor vehicles;
E) All farm products, crops, timber, minerals and the like (including oil
and gas);
F) All accessions to, substitutions for, and replacements of, all of the
foregoing;
G) All books and records pertaining to all of the foregoing; and
H) All proceeds of the foregoing, whether due to voluntary or involuntary
disposition, including insurance proceeds.
Intitals _____________________
Page 11
<PAGE>
[GRAPHIC OMITTED]
Silicon Valley Financial Services
A Division of Silicon Valley Bank
3003 Tasman Drive
Santa Clara, California 95054
(408) 654-1000 - Fax (408) 980-6410
CERTIFICATION of OFFICERS
The undersigned, being all the officers of Starbase Corporation, a
Delaware corporation (the "Corporation"), hereby certify to Silicon Valley
Financial Services, a division of Silicon Valley Bank ("SVFS") that:
1. The correct name of the Corporation is Starbase Corporation, as set
forth in the Articles of Incorporation.
2. The Corporation was incorporated on July 24, 1992, under the laws of
the State of Delaware , and is in good standing under such laws.
3. The Corporation's place of business and chief executive office being
the place at which the Corporation maintains its books and records pertaining to
accounts, accounts receivables, contract rights, chattel paper, general
intangibles, instruments, documents, inventory, and equipment, is located at:
4 Hutton Centre Drive, Suite 800
Santa Ana, California 92707
4. The Corporation has other places of business at the following
addressees:
None
5. There is no provision in the Certificate of Incorporation, Articles
of Incorporation, or Bylaws of the Corporation, or in the laws of the State of
its incorporation, requiring any vote or consent of shareholders to authorize
the sale of receivables or the grant of a security interest in any assets of the
Corporation. Such power is vested exclusively in the Corporation's Board of
Directors.
6. The officers of the Corporation, and their respective titles and signatures
are as follows:
President:
---------------------------------------------------------
(Signature)
Vice President:
Page 12
<PAGE>
---------------------------------------------------------
(Signature)
Secretary:
---------------------------------------------------------
(Signature)
Treasurer:
---------------------------------------------------------
(Signature)
Other Officer:
Title:
---------------------------------------------------------
(Signature)
7. Except as indicated in this paragraph 7, each of the officers listed
in paragraph 6 has signatory powers with respect to all the Corporation's
transactions with SVFS. Explanation of exceptions:
8. The undersigned shall give SVFS prompt written notice of any change
or amendment with respect to any of the foregoing. Until such written notice is
received by SVFS, SVFS shall be entitled to rely upon the foregoing in all
respects.
IN WITNESS WHEREOF, the undersigned have executed this Certification of
Officers on 01/15/99.
President:
--------------------------------------------
Vice President:
--------------------------------------------
Secretary:
--------------------------------------------
Treasurer:
--------------------------------------------
Page 13
<PAGE>
[GRAPHIC OMITTED]
Silicon Valley Financial Services
A Division of Silicon Valley Bank
3003 Tasman Drive
Santa Clara, California 95054
(408) 654-1000 - Fax (408) 980-6410
SECRETARY'S CERTIFICATE OF RESOLUTION
The undersigned, as Secretary of Starbase Corporation, a Delaware
corporation (the "Corporation"), hereby certifies to Silicon Valley Financial
Services that at a meeting duly convened at which a quorum was present the
following resolutions were adopted by the Board of Directors of the Corporation
and that such resolutions have not been modified, amended, or rescinded in any
respect and are in full force and effect as of today's date.
RESOLVED, that this corporation be and hereby is authorized to sell
this corporation's accounts receivable to Silicon Valley Financial Services, a
division of Silicon Valley Bank, and to grant Silicon Valley Financial Services
a security interest in this corporation's assets, including, without limitation,
accounts, accounts receivable, contract rights, chattel paper, general
intangibles, instruments, documents, letters of credit, drafts, inventory and
equipment, presently owned or hereafter acquired and proceeds and products of
the foregoing (the "Collateral," as defined in the Accounts Receivable Purchase
Agreement).
RESOLVED, that this corporation be and hereby is authorized and
directed to execute and deliver certain agreements in connection with the sale
of receivables, and granting of security interests in the Collateral to Silicon
Valley Financial Services including, without limitations, a Accounts Receivable
Purchase Agreement and UCC-1 financing statement.
RESOLVED, that the following named officers of this corporation
("Authorized Officers") be, and any of them hereby are, authorized, empowered,
and directed to execute and deliver to Silicon Valley Financial Services on
behalf of this corporation all such further agreements and instruments as may be
deemed necessary or advisable in order to fully effectuate the purposes and
intent of the foregoing resolutions.
Print Names of Authorized Officers: Title:
- ----------------------------------- --------------------------------------
- ----------------------------------- --------------------------------------
- ----------------------------------- --------------------------------------
- ----------------------------------- --------------------------------------
Page 14
<PAGE>
- ---------------------------------------- ----------------------------------
RESOLVED, that the Secretary or Assistant Secretary of this corporation
be, and hereby is authorized, empowered and directed to certify to the passage
of the foregoing resolutions under the seal of this corporation.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate this
Fifteenth day of January 1999.
--------------------------------------------
Signature
Secretary of Starbase Corporation
Page 15
<PAGE>
[GRAPHIC OMITTED]
Silicon Valley Financial Services 3003 Tasman Dr. Mail Sort
HF170, Santa Clara, Ca 95054. Ph# (408) 654-1000, Fax# (408) 980-6410.
February 1, 1999
David Katzoff, Corporate Controller
Starbase Corporation
4 Hutton Centre Drive, Suite 800
Santa Ana, California 92707
Dear Mr. Katzoff:
Enclosed are the revised documents needed to establish the proposed accounts
receivable purchase line for Starbase Corporation:
o Accounts Receivable Purchase Agreement
o Certification of Officers
o Secretary's Certificate of Resolution
o UCC1 Financing Statement (1 set)
o Exhibit A to Financing Statement
o Warrant to Purchase Stock
Please have the appropriate party's review, sign the enclosed documents and
return them along with the Intellectual Property Security Agreement to my
attention. I can be reached at 408-654-1086. Thank you.
Sincerely,
/s/ Richelle Rosales Medina
- -------------------------------
Richelle Rosales Medina
Loan Documentation Specialist
Enclosures
Page 16
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement (this "IP Agreement") is
made as of the 15th day of January, 1999 by and between Starbase Corporation
("Grantor"), and Silicon Valley Bank, a California banking corporation
("Lender").
RECITALS
A. Lender has agreed to make advances of money and to extend certain
financial accommodations to Grantor (the "Advances"), pursuant to a Accounts
Receivable Purchase Agreement dated January 15, 1999 (the "Purchase Agreement")
and Grantor desired to borrow such funds from Lender. Lender is willing to make
such Advances to Grantor, but only upon the condition, among others, that
Grantor shall grant to Lender a security interest in certain Copyrights
Trademarks, Patents, and Mask Works to secure the obligations of Grantor under
the Purchase Agreement. Defined terms used but not defined herein shall have the
same meanings as in the Purchase Agreement.
B. Pursuant to the terms of the Purchase Agreement, Grantor has granted
to Lender a security interest in all of Grantor's right title and interest,
whether presently existing or hereafter acquired in, to and under all of the
Collateral.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged and intending to be legally bound, as collateral security
for the prompt and complete payment when due of Grantor's Indebtedness under the
Purchase Agreement, Grantor hereby represents, warrants, covenants and agrees as
follows:
1. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance of all of Grantor's present or future
Indebtedness, obligations and liabilities to Lender, Grantor hereby grants a
security interest in all of Grantor's right, title and interest in, to and under
its Intellectual Property Collateral (all of which shall collectively be called
the "Intellectual Property Collateral"), including, without limitation, the
following:
(a) Any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held, including without limitation those set forth on Exhibit A
attached hereto (collectively, the "Copyrights");
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to
Grantor now or hereafter existing, created, acquired or held;
(d) All patents, patent applications and like protections
including, without limitation, improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same, including without
limitation the patents and patent applications set forth on Exhibit B attached
hereto (collectively, the "Patents");
(e) Any trademark and servicemark rights, whether registered
or not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Grantor connected with
and symbolized by such trademarks, including without limitation those set forth
on Exhibit C attached hereto (collectively, the "Trademarks")
<PAGE>
(f) All mask works or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired, including,
without limitation those set forth on Exhibit D attached hereto (collectively,
the "Mask Works");
(g) Any and all claims for damages by way of past, present and
future infringements of any of the rights included above, with the right, but
not the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(h) All licenses or other rights to use any of the Copyrights,
Patents, Trademarks, or Mask Works and all license fees and royalties arising
from such use to the extent permitted by such license or rights; and
(i) All amendments, extensions, renewals and extensions of any
of the Copyrights, Trademarks, Patents, or Mask Works; and
(j) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
2. Authorization and Request. Grantor authorizes and requests that the
Register of Copyrights and the Commissioner of Patents and Trademarks record
this IP Agreement.
3. Covenants and Warranties. Grantor represents, warrants, covenants
and agrees as follows:
(a) Grantor is now the sole owner of the Intellectual Property
Collateral, except for non-exclusive licenses granted by Grantor to its
customers in the ordinary course of business.
(b) Performance of this IP Agreement does not conflict with or
result in a breach of any IP Agreement to which Grantor is bound, except to the
extent that certain intellectual property agreements prohibit the assignment of
the rights thereunder to a third party without the licensor's or other party's
consent and this IP Agreement constitutes a security interest.
(c) During the term of this IP Agreement, Grantor will not
transfer or otherwise encumber any interest in the Intellectual Property
Collateral, except for non-exclusive licenses granted by Grantor in the ordinary
course of business or as set forth in this IP Agreement;
(d) To its knowledge, each of the Patents is valid and
enforceable, and no part of the Intellectual Property Collateral has been judged
invalid or unenforceable, in whole or in part, and no claim has been made that
any part of the Intellectual Property Collateral violates the rights of any
third party;
(e) Grantor shall promptly advise Lender of any material
adverse change in the composition of the Collateral, including but not limited
to any subsequent ownership right of the Grantor in or to any Trademark, Patent,
Copyright, or Mask Work specified in this IP Agreement;
(f) Grantor shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents, Copyrights, and Mask
Works, (ii) use its best efforts to detect infringements of the Trademarks,
Patents, Copyrights, and Mask Works and promptly advise Lender in writing of
material infringements detected and (iii) not allow any Trademarks, Patents,
Copyrights, or Mask Works to be abandoned, forfeited or dedicated to the public
without the written consent of Lender, which shall not be unreasonably withheld,
unless Grantor determines that reasonable business practices suggest that
abandonment is appropriate.
2
<PAGE>
(g) Grantor shall promptly register the most recent version of
any of Grantor's Copyrights, if not so already registered, and shall, from time
to time, execute and file such other instruments, and take such further actions
as Lender may reasonably request from time to time to perfect or continue the
perfection of Lender's interest in the Intellectual Property Collateral;
(h) This IP Agreement creates, and in the case of after
acquired Intellectual Property Collateral, this IP Agreement will create at the
time Grantor first has rights in such after acquired Intellectual Property
Collateral, in favor of Lender a valid and perfected first priority security
interest in the Intellectual Property Collateral in the United States securing
the payment and performance of the obligations evidenced by the Note and the
Purchase Agreement upon making the filings referred to in clause (i) below;
(i) To its knowledge, except for, and upon, the filing with
the United States Patent and Trademark office with respect to the Patents and
Trademarks and the Register of Copyrights with respect to the Copyrights and
Mask Works necessary to perfect the security interests created hereunder and
except as has been already made or obtained, no authorization, approval or other
action by, and no notice to or filing with, any U.S. governmental authority of
U.S. regulatory body is required either (i) for the grant by Grantor of the
security interest granted hereby or for the execution, delivery or performance
of this IP Agreement by Grantor in the U.S. or (ii) for the perfection in the
United States or the exercise by Lender of its rights and remedies thereunder;
(j) All information heretofore, herein or hereafter supplied
to Lender by or on behalf of Grantor with respect to the Intellectual Property
Collateral is accurate and complete in all material respects.
(k) Grantor shall not enter into any agreement that would
materially impair or conflict with Grantor's obligations hereunder without
Lender's prior written consent, which consent shall not be unreasonably
withheld. Grantor shall not permit the inclusion in any material contract to
which it becomes a party of any provisions that could or might in any way
prevent the creation of a security interest in Grantor's rights and interest in
any property included within the definition of the Intellectual property
Collateral acquired under such contracts, except that certain contracts may
contain anti-assignment provisions that could in effect prohibit the creation of
a security interest in such contracts.
(l) Upon any executive officer of Grantor obtaining actual
knowledge thereof, Grantor will promptly notify Lender in writing of any event
that materially adversely affects the value of any material Intellectual
Property Collateral, the ability of Grantor to dispose of any material
Intellectual Property Collateral of the rights and remedies of Lender in
relation thereto, including the levy of any legal process against any of the
Intellectual Property Collateral.
4. Lender's Rights. Lender shall have the right, but not the
obligation, to take, at Grantor's sole expense, any actions that Grantor is
required under this IP Agreement to take but which Grantor fails to take, after
fifteen (15) days' notice to Grantor. Grantor shall reimburse and indemnify
Lender for all reasonable costs and reasonable expenses incurred in the
reasonable exercise of its rights under this section 4.
5. Inspection Rights. Grantor hereby grants to Lender and its
employees, representatives and agents the right to visit, during reasonable
hours upon prior reasonable written notice to Grantor, and any of Grantor's
plants and facilities that manufacture, install or store products (or that have
done so during the prior six-month period) that are sold utilizing any of the
Intellectual Property Collateral, and to inspect the products and quality
control records relating thereto upon reasonable written notice to Grantor and
as often as may be reasonably requested, but not more than one (1) in every six
(6) months; provided, however, nothing herein shall entitle Lender access to
Grantor's trade secrets and other proprietary information.
3
<PAGE>
6. Further Assurances; Attorney in Fact.
(a) On a continuing basis, Grantor will, subject to any prior
licenses, encumbrances and restrictions and prospective licenses, make, execute,
acknowledge and deliver, and file and record in the proper filing and recording
places in the United States, all such instruments, including appropriate
financing and continuation statements and collateral agreements and filings with
the United States Patent and Trademarks Office and the Register of Copyrights,
and take all such action as may reasonably be deemed necessary or advisable, or
as requested by Lender, to perfect Lender's security interest in all Copyrights,
Patents, Trademarks, and Mask Works and otherwise to carry out the intent and
purposes of this IP Agreement, or for assuring and confirming to Lender the
grant or perfection of a security interest in all Intellectual Property
Collateral.
(b) Grantor hereby irrevocably appoints Lender as Grantor's
attorney-in-fact, with full authority in the place and stead of Grantor and in
the name of Grantor, Lender or otherwise, from time to time in Lender's
discretion, upon Grantor's failure or inability to do so, to take any action and
to execute any instrument which Lender may deem necessary or advisable to
accomplish the purposes of this IP Agreement, including:
(i) To modify, in its sole discretion, this IP
Agreement without first obtaining Grantor's approval of or signature to such
modification by amending Exhibit A, Exhibit B, Exhibit C, and Exhibit D hereof,
as appropriate, to include reference to any right, title or interest in any
Copyrights, Patents, Trademarks or Mask Works acquired by Grantor after the
execution hereof or to delete any reference to any right, title or interest in
any Copyrights, Patents, Trademarks, or Mask Works in which Grantor no longer
has or claims any right, title or interest; and
(ii) To file, in its sole discretion, one or more
financing or continuation statements and amendments thereto, relative to any of
the Intellectual Property Collateral without the signature of Grantor where
permitted by law.
7. Events of Default. The occurrence of any of the following shall
constitute an Event of Default under this IP Agreement:
(a) An Event of Default occurs under the Purchase Agreement;
or any document from Grantor to Lender; or
(b) Grantor breaches any warranty or agreement made by Grantor
in this IP Agreement.
8. Remedies. Upon the occurrence and continuance of an Event of
Default, Lender shall have the right to exercise all the remedies of a secured
party under the California Uniform Commercial Code, including without limitation
the right to require Grantor to assemble the Intellectual Property Collateral
and any tangible property in which Lender has a security interest and to make it
available to Lender at a place designated by Lender. Lender shall have a
nonexclusive, royalty free license to use the Copyrights, Patents, Trademarks,
and Mask Works to the extent reasonably necessary to permit Lender to exercise
its rights and remedies upon the occurrence of an Event of Default. Grantor will
pay any expenses (including reasonable attorney's fees) incurred by Lender in
connection with the exercise of any of Lender's rights hereunder, including
without limitation any expense incurred in disposing of the Intellectual
Property Collateral. All of Lender's rights and remedies with respect to the
Intellectual Property Collateral shall be cumulative.
4
<PAGE>
9. Indemnity. Grantor agrees to defend, indemnify and hold harmless
Lender and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this IP Agreement, and (b) all
losses or expenses in any way suffered, incurred, or paid by Lender as a result
of or in any way arising out of, following or consequential to transactions
between Lender and Grantor, whether under this IP Agreement or otherwise
(including without limitation, reasonable attorneys fees and reasonable
expenses), except for losses arising from or out of Lender's gross negligence or
willful misconduct.
10. Reassignment. At such time as Grantor shall completely satisfy all
of the obligations secured hereunder, Lender shall execute and deliver to
Grantor all deed, assignments, and other instruments as may be necessary or
proper to reinvest in Grantor full title to the property assigned hereunder,
subject to any disposition thereof which may have been made by Lender pursuant
hereto.
11. Course of Dealing. No course of dealing, nor any failure to
exercise, nor any delay in exercising any right, power or privilege hereunder
shall operate as a waiver thereof.
12. Attorneys' Fees. If any action relating to this IP Agreement is
brought by either party hereto against the other party, the prevailing party
shall be entitled to recover reasonable attorneys fees, costs and disbursements.
13. Amendments. This IP Agreement may be amended only by a written
instrument signed by both parties hereto.
14. Counterparts. This IP Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.
15. Law and Jurisdiction. This IP Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
for choice of law provisions. Grantor and Lender consent to the nonexclusive
jurisdiction of any state or federal court located in Santa Clara County,
California.
16. Confidentiality. In handling any confidential information, Lender
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this IP
Agreement except that the disclosure of this information may be made (i) to the
affiliates of the Lender, (ii) to prospective transferee or purchasers of an
interest in the obligations secured hereby, provided that they have entered into
comparable confidentiality agreement in favor of Grantor and have deliver a copy
to Grantor, (iii) as required by law, regulation, rule or order, subpoena
judicial order or similar order and (iv) as may be required in connection with
the examination, audit or similar investigation of Lender.
IN WITNESS WHEREOF, the parties hereto have executed this IP Agreement on
the day and year first above written.
Address of Grantor: GRANTOR:
4 Hutton Centre Drive, Suite 800 Starbase Corporation
Santa Ana, CA 92707
By: ------------------------------
Name: ----------------------------
Title: ----------------------------
5
<PAGE>
Exhibit "A" attached to that certain Intellectual Property Security Agreement
dated January 15, 1999.
EXHIBIT "A"
COPYRIGHTS
SCHEDULE A - ISSUED COPYRIGHTS
- ------------------------------
COPYRIGHT REGISTRATION DATE OF
DESCRIPTION NUMBER ISSUANCE
- ----------- ------------ --------
SCHEDULE B - PENDING COPYRIGHT APPLICATIONS
- -------------------------------------------
FIRST DATE
COPYRIGHT APPLICATION DATE OF OF PUBLIC
DESCRIPTION NUMBER FILING CREATION DISTRIBUTION
- ----------- ----------- --------------- ------------
SCHEDULE C - UNREGISTERED COPYRIGHTS (Where No Copyright Application is Pending)
- --------------------------------------------------------------------------------
DATE AND
RECORDATION
NUMBER OF
IP AGREEMENT TO
OWNER OF
ORIGINAL GRANTOR (IF
AUTHOR OR ORIGINAL AUTHOR
OWNER OF OR OWNER OF
FIRST DATE COPYRIGHT COPYRIGHT IS
COPYRIGHT DATE OF OF (IF DIFFERENT DIFFERENT ROM
DESCRIPTION CREATION DISTRIBUTION FROM GRANTOR GRANTOR
- ----------- -------- ------------ ------------- ---------------
6
<PAGE>
Exhibit "B" attached to that certain Intellectual Property Security Agreement
dated January 15, 1999.
EXHIBIT "B"
PATENTS
PATENT
DESCRIPTION DOCKET NO. COUNTRY SERIAL NO. FILING DATE STATUS
- ----------- --------- ----------------- ----------- ------
7
<PAGE>
Exhibit "C" attached to that certain Intellectual Property Security Agreement
dated January 15, 1999.
EXHIBIT "C"
TRADEMARKS
TRADEMARK
DESCRIPTION COUNTRY SERIAL NO. REG. NO STATUS
- ----------- ------- --------- ------- ------
8
<PAGE>
Exhibit "D" attached to that certain Intellectual Property Security Agreement
dated January 15, 1999.
EXHIBIT "D"
MASK WORKS
MASK WORK
DESCRIPTION COUNTRY SERIAL NO. REG. NO STATUS
- ----------- ------- --------- ------- ------
9
May 6, 1999
Mr. Kurt Motamedi
PO Box 11299
Marina del Rey, CA 90295
Dear Mr. Motamedi,
Thank you for the meeting yesterday. Pursuant to our discussion, this letter
confirms our agreement regarding the consulting services to be rendered StarBase
by you. We agreed that you will provide 25 days of management and team
development related consulting (including reports) to StarBase during 1998.
The consulting retainer fee for 25 days of consulting is $60,000. The retainer
is payable on the day this letter of agreement. As we discussed, you may be
interested in accepting stock in lieu of cash. The Board of Directors must
approve the issuance of stock and it will be restricted until we can register
it. We will seek Board approval and you can decide if you want cash or stock. In
addition, the incidentals and other out of pocket expenses will be separately
charged to StarBase for reimbursement. The fee for additional days of consulting
(in the excess of 25 days) will be $2,500 per day subject to prior approval by
StarBase.
We look forward to working with you.
Sincerely,
/s/ Douglas S. Norman
Douglas S. Norman
Director of Finance
MARKETING ACCESS PROGRAM
MARKETING AGREEMENT
THIS AGREEMENT made and entered into this 13th day of July, 1998, by and between
CONTINENTAL CAPITAL & EQUITY CORPORATION, a Florida Corporation hereinafter is
referred to as "CCEC", and STARBASE CORPORATION, a Delaware Corporation
hereinafter referred to as "Company".
WITNESSETH:
For and consideration of the mutual promises and covenants contained herein, the
parties hereto agree as follows:
1. ENGAGEMENT. Company hereby hires and retains CCEC as an independent
contractor; and CCEC does hereby accept as an independent contractor to provide
the services described herein to the Company upon the terms and conditions
hereinafter set forth.
2. TERM. The term of this Agreement shall be from the 1st day of August, 1998
through the 31st day of July, 1999. The Company shall have the option to renew
this Agreement for a period of no less than 12 months.
3. DUTIES AND OBLIGATIONS OF CCEC. CCEC shall have the following duties and
obligations under this Agreement:
3.1 Establish a financial public relations methodology designed to
increase awareness of the Company within the investments community.
3.2 Assist the Company in the implementation of its business plan
and in accurately disseminating information to the market place,
which information has been provided by the Company.
3.3 To expose the Company to a broad network of active retail
brokers, financial analysts, institutional fund managers, private
investors and active financial newsletter writers.
3.4 Prepare Company due diligence reports, corporate profile, fact
sheets and quarterly newsletters.
3.5 Conduct a tele-marketing campaign to the investment community
and brokerage community and conduct tele-conferences with CCEC
moderator, Company executive(s), and brokers, financial analysts,
fund managers and the like.
3.6 Feature the Company's corporate profile or fact sheet on CCEC's
web site(s).
3.7 Direct Mail a quarterly newsletter featuring the Company to
selected brokers, institutional fund managers, financial analysts
and accredited investors.
3.8 Assist the Company in the preparation of all press releases and
coordinate the releases via a Company paid account with PR NewsWire
or BusinessWire.
3.9 Fax broadcasts press releases, broker updates, Company
newsletters to brokers, institutional fund managers, financial
analysts, and accredited investors.
3.10 E-mail press releases, corporate announcements, broker
updates, Company news developments to a targeted e-mail database of
brokers, institutional fund managers, financial analysts, and
accredited investors.
3.11 Serve as the Company's external publicist and endeavor to
obtain media coverage on the Company in both trade and industry
press, on local and national radio and/or TV programming, in
subscription-based financial newsletters, and on the worldwide web.
3.12 Strive to obtain the Company institutional analyst coverage
and investment banking sponsorship.
Page 1 of 5
<PAGE>
3.13 Each of the foregoing activities will be coordinated through,
and approved by, a designated contact person at the Company. In
order to ensure compliance with applicable securities laws, no
activities will be engaged in by CCEC unless approved by the
Company.
3.14 CCEC will perform its services hereunder in accordance with
the highest professional standards and shall comply with all
applicable laws, rules and regulations (including, without
limitation, applicable securities laws).
ALL OF THE FOREGOING CCEC PREPARED DOCUMENTATION CONCERNING THE COMPANY,
INCLUDING. BUT NOT LIMITED TO, DUE DILIGENCE REPORTS, CORPORATE PROFILE. FACT
SHEETS, AND OUARTERLY NEWSLETTERS, SHALL BE PREPARED BY CCEC FROM MATERIALS
SUPPLIED TO IT BY THE COMPANY AND SHALL BE APPROVED BY THE COMPANY PRIOR TO
DISSEMINATION BY CCEC. CCEC SHALL NOT DISSEMINATE ANY SUCH DOCUMENTATION,
WHICH HAS NOT BEEN APPROVED BY THE COMPANY.
4. CCEC'S COMPENSATION. Upon the execution of this Agreement, Company hereby
covenants and agrees to pay CCEC as follows:
4.1 Monthly cash retainer fee of $8,333.00 (Eight Thousand Three
Hundred Thirty Three United States Dollars), the first retainer fee
being due and payable upon execution of this Agreement with each
subsequent monthly retainer fee of $8,333.00 (Eight Thousand Three
Hundred Thirty Three United States Dollars) being paid on or before
the 1St of every month for the term of this Agreement.
4.2 Further, the Company, at its own election and subsequent to the
approval of its Board of Directors, may issue CCEC shares of its
Common Stock equal in value to the outstanding balance owed CCEC
pursuant to the terms and conditions herein. Each share of Common
Stock shall be valued at the average closing bid price for the 5
(five) days immediately prior to the date of Board approval. The
Company agrees to use its reasonable best efforts to register said
Common Stock for resale by CCEC pursuant to an SEC Registration
Statement on Form S-3, or as such other applicable form as may be
appropriate, within 120 days after delivery of the restricted
shares and confirmed receipt by CCEC and the Company's receipt of
an investment representation letter by CCEC. Upon delivery and
confirmed receipt of said shares, compensation of $100,000 shall be
deemed paid in full.
4.3 If the Board does not authorize the stock consideration
contemplated in Section 4.2 hereof, the Company shall pay the
entire stock consideration hereunder in cash.
4.4 In addition, the Company hereby covenants and agrees to issue
CCEC, pursuant to Board approval, an option or warrant to purchase
up to 50,000 common shares, in increments of no less than 10,000
shares, with an exercise price valued at $3.25 per share. The term
of the option or warrant shall expire 18 months from the day Board
approval is awarded. The Company agrees to use its reasonable best
efforts to register the common shares underlying the option or
warrant for resale by CCEC pursuant to an SEC Registration
Statement on Form S-3, or such other applicable form as may be
appropriate, within 180 days of Board approval.
4.5 As provided in Section 2 hereof, the Company shall have the
right to renew this Agreement for an additional 12 months. In the
event that the Company elects to exercise this option to renew,
then the Company covenants and agrees to pay CCEC cash and/or
shares which are subject to the same terms and conditions as
defined in Sections 4.1, 4.2, 4.3 and 4.4 herein with respect to
each annual one year renewal period.
5. CCEC'S EXPENSES AND COSTS. Company shall pay all reasonable out-of-pocket
costs and expenses incurred by CCEC, its directors, officers, employees and
agents, in carrying out its duties and obligations pursuant to the provisions of
this Agreement, excluding CCEC's general and administrative expenses and costs,
but including, and not limited to, the following costs and expenses; provided
all costs and expense items in excess of $500.00 (Five Hundred U.S. Dollars)
must be approved by the Company in writing prior to CCEC's incurrence of the
same:
5.1 Travel expenses, including, but not limited to, transportation,
lodging and food expenses, when such travel is conducted on behalf
of the Company.
Page 2 of 5
<PAGE>
5.2 Seminars, expositions, money and investment shows.
5.3 Radio and television time and print media advertising costs,
when applicable.
5.4 Subcontract fees and costs incurred in preparation of research
reports, when applicable.
5.5 Cost of on-site due diligence meetings, if any.
5.6 Internet advertising costs, if applicable.
5.7 Printing and publication costs of brochures and marketing
materials.
5.8 Corporate web site development costs.
5.9 Printing and publication costs of Company annual reports,
quarterly reports, and/or other shareholder communication
collateral material.
5.10 Creation, production, and mailing of Inside Wall Street lead
generation pieces and associated fulfillment material and services,
i.e. corporate profiles, presidential cover letters, pre-printed
envelopes, 1-800 numbers, postage, list selection, lead
distribution, etc, at an established price of $2.00 per Inside Wall
Street piece mailed.
Company shall pay to CCEC all costs and expenses incurred within thirty (30)
days after receipt of CCEC's written invoice for the same, except for any
invoice or portion thereof that is being contested in good faith, and
excluding any costs associated with material and services defined in Section
5.10 above, which are due and payable in advance of material production.
CCEC shall not engage any sub-contractor without the Company's prior written
authorization.
6. COMPANY'S DUTIES AND OBLIGATIONS. Company shall have the following duties and
obligations under this Agreement:
6.1 Cooperate fully with the reasonable requests of CCEC so as to
assist CCEC to perform its obligations under this Agreement.
6.2 Within ten (10) days of the date of execution of this Agreement
to deliver to CCEC a due diligence package on the Company including
all the Company's filings with the Securities and Exchange
Commission within the last twelve months, the last twelve months of
press releases on the Company and all other relevant materials,
including, but not limited to, corporate reports, brochures, and
the like; a reasonably current list of the names and addresses of
all the Company's shareholders known to the Company; and a
reasonably current list of the brokers and market makers in the
Company's securities and which have been following the Company.
6.3 The Company will act diligently and promptly in reviewing
materials submitted to it from time to time by CCEC and to inform
CCEC of any inaccuracies contained therein prior to the
dissemination of such materials.
8. NONDISCLOSURE. Concurrently with the execution and delivery of this
Agreement, the Company and CCEC shall enter into the Confidentiality Agreement
attached hereto as Exhibit A, which Confidentiality Agreement shall form an
integral part of this Agreement.
9. DEFAULT. In the event of any default in the payment of CCEC's compensation to
be paid to it pursuant to this Agreement, or any other charges or expenses on
the Company 's part to be paid, or any part or installment thereof, at the time
and in the manner herein prescribed for the payment thereof and as when the same
becomes due and payable, and such default shall continue for thirty (30) days;
in the event of any default in the performance of any of the other covenants,
conditions, restrictions, agreements, or other provisions herein contained on
the part of the Company to be performed, kept, complied with or abided by, and
such default shall continue for thirty (30) days after CCEC -has given Company
written notice thereof, or if a petition in bankruptcy is filed by the
Page 3 of 5
<PAGE>
Company, of if the Company is adjudicated of bankruptcy. Then, upon written
notice from CCEC to the Company, CCEC may terminate this Agreement and the
Company shall remain obligated to pay all amounts due to CCEC through the date
of termination. After the effective date of termination, CCEC shall have no
further obligation to provide services to the Company hereunder.
In the event of any breach or violation of this Agreement by CCEC of any of its
duties or obligations hereunder and such breach or violation is not fully cured
with thirty (30) days after written notice from the Company to CCEC, or if a
petition in bankruptcy is filed by CCEC, or if CCIEC is adjudicated a bankrupt,
the Company may, upon written notice, terminate this Agreement and the services
of CCEC hereunder. Notwithstanding any such termination, CCEC shall remain
responsible for any damages incurred by the Company as a result of such breach
or violation, if applicable.
10. REPRESENTATIONS AND WARRNTIES. Each of the Company and CCEC represents and
warrants to other for the purpose of inducing the other party to enter into and
consummate this Agreement as follows:
10.1 It has the power and authority to execute, deliver and perform
this Agreement.
10.2The execution and delivery by it of this Agreement has been
duly and validly authorized by all requisite action. No license,
consent or approval of any person is required to be obtained in
connection with its execution, delivery and performance of this
Agreement.
10.3 This Agreement has been duly executed and delivered by the
Company and CCEC. This Agreement is the legal, valid and binding
obligation of the Company and CCEC, as the case may be, enforceable
against the Company and CCEC, as the case may be, in accordance
with its respective terms, subject to the effect to any applicable
bankruptcy, insolvency, reorganization, moratorium or similar law
effecting creditors' rights generally and to general principals of
equity.
10.4 The execution and delivery by the Company and CCEC, as the
case may be, of this Agreement does not conflict with, constitute a
breach of or a default thereunder (i) any applicable law, or any
applicable rule, judgment, order, writ, injunction, or decree of
any court; (ii) any applicable rule or regulation of any
administrative agency or other governmental authority; (iii) the
certificate of incorporation and By-Laws of the Company and CCEC,
as the case may be; (iv) any agreement, indenture, instrument or
contract to which the Company and CCEC, as the case may be, is now
a party of by which it is bound.
11. MISCELLANEOUS
11.1 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing, and shall be
deemed to have been duly given when delivered personally or sent by
registered or certified mail, return receipt requested, postage
prepaid to the Parties hereto at their addresses indicated
hereinafter. Either party may change his or its address for the
purpose of this paragraph by written notice similarly given.
Parties addresses are as follows:
COMPANY: 4 Hutton Centre Drive
Suite 800
Santa Ana, California 92707
CCEC: Suite 200
195 Wekiva Springs Road
Longwood, Florida 32779
11.2 Entire Agreement. This Agreement represents the entire
Agreement between the Parties in relation to the subject matter
hereof and supersedes all prior agreements between such Parties
relating to such subject matter.
11.3 Amendment of Agreement. This Agreement may be altered or
amended, in whole or in part, only in writing signed by the Party
against whom enforcement is sought.
11.4 Waiver. No waiver of any breach or condition of this Agreement
shall be deemed to be a waiver of any other subsequent breach or
condition, whether of a like or different nature.
Page 4 0f 5
<PAGE>
11.5 Captions. The captions appearing in this Agreement are
inserted as a matter of convenience and for reference and in no way
affect this Agreement, define, limit or describe its scope or any
of its provisions.
11.6 Situs. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. The venue shall
be New York.
11.7 Benefits. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their heirs, personal
representatives, successors and assigns; provided that CCEC may not
assign this Agreement without prior written consent of the Company.
11.8 Severability. If any of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall
attach only to such provision and shall not in any way affect or
render invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if such
invalid or unenforceable provision were not contained herein.
11.9 Arbitration. Any controversy, dispute or claim arising out of
or relating to this Agreement or the breach thereof shall tie
settled by binding arbitration, which shall be the exclusive means
of resolving any such controversy, dispute or claim. Arbitration
proceedings shall be conducted in accordance with the rules then
prevailing of the American Arbitration Association or any
successor. The award of the Arbitration shall be conclusive and
binding on the parties, not subject to judicial review or appeal.
Judgement shall be entered upon an award of a majority of the
arbitrators filed in a court of competent jurisdiction and
confirmed by such court. The exclusive venue for such arbitration
proceedings shall be New York. The parties consent that the cost of
arbitration, attorneys' fees of the parties, together with all
other expenses shall be paid as provided in the arbitration award.
11.10 Currency. In all instances, references to monies used in this
Agreement shall be deemed to be United States dollars.
11.11 Multiple Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original,
and all of such counterparts shall constitute one (1) instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the day
and year first above written.
Continental Capital Corporation
-------------------------------------
Starbase Corporation
-------------------------------------
Page 5 0f 5
OPINION OF PARKER CHAPIN FLATTAU & KLIMPL, LLP
April 19, 1999
StarBase Corporation
4 Hutton Centre Drive, Suite 800
Santa Ana, CA 92707-8713
Ladies and Gentlemen:
We have acted as counsel to StarBase Corporation (the "Company") in
connection with a Registration Statement on Form S-3 filed by the Company with
the Securities and Exchange Commission (the "Registration Statement") relating
to up to 7,180,812 shares (the "Shares") of the Company's common stock, par
value $0.01 per share (the "Common Stock"). Of such Shares, 6,588,842 may be
issued upon conversion of the Series H Preferred Stock, 435,977 may be issued
upon the exercise of warrants issuable to the holders of the Shares (the
"Warrants") and 155,993 shares of common stock have been issued by the Company
(the "Other Shares").
In connection with the foregoing, we have examined, among other things,
the Registration Statement, the Warrants and originals or copies, satisfactory
to us, of all such corporate records and of all such agreements, certificates
and other documents as we have deemed relevant and necessary as a basis for the
opinion hereinafter expressed. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the original documents submitted to us as
copies. As to any facts material to such opinion, we have, to the extent that
relevant facts were not independently established by us, relied on certificates
of public officials and certificates, oaths and declarations of officers or
other representatives of the Company.
Based upon the foregoing, we are of the opinion that (i) the Shares
issuable upon conversion of the Series H Preferred Stock (when such shares are
paid for and issued in accordance with the terms of the Series H Preferred
Stock) will be legally issued, fully paid and non-assessable; (ii) the Shares
issuable upon the exercise of the Warrants (when such Shares are paid for and
issued in accordance with the terms of the Warrants) will be legally issued,
fully paid and non-assessable; and (iii) the Other Shares are legally issued,
fully paid and non-assessable.
We hereby consent to the use of our name under the caption "Legal
Matters" in the Prospectus constituting a part of the Registration Statement and
to the filing of a copy of this opinion as an exhibit.
Very truly yours,
/s/ PARKER CHAPIN FLATTAU & KLIMPL, LLP
PARKER CHAPIN FLATTAU & KLIMPL, LLP
